VAT on loan leads/commissions?

[netnerduk]

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The VAT on loan leads or commissions has been very much a grey area in any research i have done. Im hoping thats someone can shed some light on it.

The main problem arises from the fact that Financial Services are vat exempt (or zero rated) , so if an affiliate charges a loan company VAT, then the loan company cannot normally reclaim it, and as such , they tend to say that their commissions include VAT.

If an affiliate is seen as being an intermediary,and providing more than just a simple advertising or admin function, then they do not have to charge or pay VAT on the loan commissions (in my understanding).

How does an affiliate do this? How do i avoid (legally) having to charge a loan company VAT on loan leads?

[Mogga]

Someone suggested recently setting up a ltd for the main stuff then the stuff we don't get vat on run through a sep company/sole trader account under the VAT limit.

Sounded very complicated - but if you save yourself some money ...

[netnerduk]

What if your main stuff is finance and you are over the VAT limit ( by a lot ) ?

[Mogga]

Aren't you VAT free if you're registered with a consumer credit licence?

If you're over the vat limit you should chat to an accountant or VAT specialist.

[netnerduk]

As far as i know , you must be an intermediary so you must have contributed " specialised services in completing the finance transaction " rather than just basic admin.

I do have an accountant, just im trying to find out as much as i can myself first as there are likely to be people on here who are in such a situation.

Just having a CCL is unlikely to qualify you for automatic VAT exemption.

Does anyone else know about these things?

[nicksthename]

I am also very interested in hearing any thoughts on this, if anyone can shed some light?

[drivetowin]

Might be a silly question but have you thought about ringing your local VAT office and asking them? - I've always found our local VAT office really helpful whenever I've had a VAT related query - and yes they have sometimes told me things which have meant paying less/reclaiming more VAT so their advice does seem to be pretty impartial.

[nicksthename]

Word of advice: don't phone HM Customs and Excise advice service number that they give out on the websites. Bloke I spoke to was absolutely clueless.

Been doing some more research and found that to be exempt:

You must ‘undertake work preparatory to the completion of a contract for the provision of financial services.’

but apprarantly this would not include work done of a general nature such as administrative or clerical formalities.

So it seems you must do something integral in the process towards getting the financial services contract.

I have been advised of an HM Revenue and Customs address where I can send my enquiry and get a written 'ruling'.

But if anyone has any further info, please chip in....

[nkernick]

netnerduk

I dont understand why VAT is a problem?
If you are not VAT registered you dont charge VAT
If you are VAT registered you do charge VAT

Every company I deal with apart from US companies add VAT on after the event.
So if the lead is £20 they pay £20+VAT are you saying there are companies out there that dont do this? (CJ I treat as VAT exempt)

[drivetowin]

Yeah - because finance companies cant reclaim the VAT, many willl say that their lead amount is inclusive of VAT, so its not that they're not paying the VAT but they only pay say £20 in total, so if you are VAT registered you have to invoice them for £17.02 plus £2.98 VAT.

[marcg]

Merchants are paying you for advertising them, so they need to pay affiliates VAT, regardless of whether they operate in a VATable industry. Obviously VAT as a cost is something the merchants have to swallow and so they may adjust thier commission rate to compensate for what they can afford to pay.

I'd recommend that you either negotiate a better deal with the merchant (so you get paid £20+vat, rather than £20 incl vat) or you just accept the lower commission for a lower VAT bill at the end of the year.

[netnerduk]

Im talking about direct deals here, not through 3rd party merchants. So, the companies i would be dealing with are not VAT registered, and as such it is in my interest not to have to charge VAT as, as stated earlier, would mean that i would need to pay VAT out of the total amount i receive (hence reducing my profits by a further 17.5% before tax).

Ive read a bit more into it, and i think i need to be involved in an act of mitigation between the loan company and the applicant and take some part more than just "filling in forms" in the process.

What the "cyber world equivalent" of this could be is another question.

Does anyone in here have a written ruling from C&E on such a problem? I am hesitant to contact them before gethering as much info as possible as i would fear a ruling that swung the wrong way.

[drivetowin]

Given all of the controls now surrounding Financial Services transactions, I would be wary of wanting to become more involved in the process than you already are - yes it might mean you wouldnt have to charge VAT (bear in mind you then probably wouldnt be able to reclaim VAT on your purchases either) - may or may not be a problem but if for example you do a lot of ads on Google adwords you could suddenly find yourself paying VAT there where you dont if you're VAT registered - and also you would then almost certainly need to be registered with the FSA which means having staff (or you) trained and examined to their standards. I have no idea how rigorous their training and exams are but you might find this ends up costing you far more than just swallowing the VAT.

[drivetowin]

Just had a quick look at the FSA Regulations and it looks like for most people registration is £1,500 per year, but it can take them up to 6 months to process your application and your FSA registration doesnt start until they have, and they require you to have professional indemnity insurance of at least £1,500,000