VAT Due on All Payments Received by Internet Business Acting as Principal, Not Agent

• The First-tier Tribunal (FTT) has released its decision in the case of All Answers Limited (AAL) regarding whether it operated as an agent with VAT due only on the commission element of payments received.
• AAL is an internet-based business that provides academic work services.
• HMRC argued that AAL should be liable for VAT on all payments received, as it is the main service provider and not acting as an agent.
• A first hearing in 2018 found in favor of HMRC, but AAL appealed to the Upper Tribunal (UT), which held in 2020 that AAL acted as the principal in making the supply of work to the customer.
• The UT concluded that AAL, and not the writers, made a supply of the academic work and should account for VAT.
• AAL provided revised contracts to HMRC in 2020, but the FTT held that the updated contract terms did not change the conclusion reached by the UT.
• This case highlights the difficulty of establishing an agency relationship for VAT purposes and the importance of reviewing current contracts for businesses involved in agency arrangements.

Source: financeandtax.decisions.tribunals.gov.uk

Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.

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