VAT input deduction with Undisclosed Buying Agents

[rangerpea99]

I am a self-employed individual who have been using undisclosed buying agents for supplies from VAT registered businesses in the UK.
I then sell the services in the UK as the principal at retail and charge 20% VAT as I am VAT registered.

The undisclosed agents buy service for myself (which I will then sell on) - as such they do not own the purchases services and have no rights over them.
They buy standard-rated services from VAT registered businesses using their debit cards, acting as regular retail customers.

On a monthly basis I refund their debit cards for the purchases with my own money so that they can keep trading on my behalf. The agents are not VAT registered. Note that these agents are not charging me a commission. In fact they are doing it for free - as they are friends of mine.

The problem with this model is that by the current VAT regulations when supplies are made to an undisclosed agent, they are `treated as made to them and by them`. This is true, since in fact their principal is not aware that they are buying services on my behalf.

If my agents were VAT registered, I could then claim back the VAT they charge me, but they are not since the amount of yearly purchases made on my behalf was less than the required threshold.

Surely, you can see by now the problems I am having with this supply chain.

For example, Principal sells services to my undisclosed agent at £100+20%VAT. I refund their cost without any commission. They are doing this for free. I sell that service at £200 to my customer which includes £33 VAT. I am supposed to charge VAT at 20% but I am unable to recover it since my agents are not VAT registered.

In the following VAT notice in the HMRC website, there is not direct reference on how to behave when:

- the undisclosed buying agent is being charged the standard-rate by their principal
- the undisclosed buying agent is not VAT registered
- the buying agent is undisclosed and buying on behalf of VAT registered person.

https://www.gov.uk/government/publicati ... eral-rules

Based on current regulation, since I am using an agent who is exempt from charging me VAT, I would not be able to recover VAT meaning that in practice
when I buy a service at £100. I end up paying 20% more in the end. This would essentially destroy my business as I would not be able to claim back VAT on the purchases made through the agents. Note that I would not be able to use a Flat Rate.

My questions are:

- If non-vat registered undisclosed agents buy services with my own money, can I deem the supply as made to me and thus claim the VAT that was charged to the agents by their principal?
- If their supplies to me are exempt from VAT, does this change how I should treat the supplies to my customers? Is there any exemption or reduction?
- Is there a solution to this?

I would appreciate feedback on this. Many Thanks

[les35]

I wonder why your friends are purchasing the services for you. Why do they not disclose that they are acting for you? Why are you not buying the services directly, since you do not pay your agents?
Depending on the answers to those questions, you should consider using only agents who are registered for VAT, so that they can recover the VAT.

[rangerpea99]

They do not disclosed that they are not acting for me because the terms of sales of those services state that there are limits to the number of services
each customer can buy.

[les35]

The consequence is that the retailer is not supplying you; therefore you cannot receive a VAT invoice to enable you to reclaim the VAT.

[fcsaba1990]

Dear Sir or Madam,
I am a businessman from Hungary who owns a website (platform) which connects people looking for caravans, motorhomes to rent to owners who wish to rent out their vehicles. The website is maintained by the commission fees collected after the nightly rental fees which are paid by the lessees. I would like to ask whether the platform would fit into the definition of undisclosed agent? Or is it another type of intermediary? Could you tell me under which circumstances can the platform be viewed as an undisclosed agent? If it is so, should the company pay VAT after the commission fees it collects or would it have both VAT payable (after the money the lessees pay for the lessors plus the commission fees of the website) and VAT receivable (what the lessor collects)?
If the company is headquartered and centrally managed in Budapest, should it pay VAT for UK or only in Hungary? Is there any threshold for VAT in this case? Is it also 83,000 GBP likewise for the commission fees it collects?
Thank you very much for your support!
Kind regards,
Csaba