VAT Threshold Question?

victor56

Hello!

So I own a massage business which unfortunatley is not exempt like a physio, and within the next 2 years will most likely hit the 90k threshold.  I have a number of self employed contractors offering massage services and am wondering if the procedures / contracts I have in place ensure that the money they earn is not counted towards the threshold.  I have read many of the posts on here which are related more to hairdresses and rent a chair.

The staff get 100% of the booking amount and they pay me 50%.  We do not take cash or card payments, all bookings are prepaid via our booking system which is treatwell.  Customers booking select the staff member they want via the system.  They do not wear uniforms, they can work when they want and for however long they want.  This is all written in their contract which was designed by Peninsula HR..  It is stated both on the contract and on the website that the customers contract is with the person doing the massage and not with the business.

The only 2 potential issues I see which could be somewhat of a grey area are all of the money is paid directly from treatwell to myself and then I keep the % I am owed.  There is absolutely no way for treatwell to pay everyone individually as I have enquired.  Also the massage rooms are setup with beds and oil etc of which they pay me for within the % comission I take.

So to cut  a long story short

For sake or arguement Say if the business earnt 100k,  20k is mine and 80k is "the staff" of which I got 50%.  This would mean I earn 20k + 40 =  60k which sets me nicely under the threshold.  Or would the full 100k be subject to VAT and I would need to register?

Ultimately it isn't that the VAT would kill my business it's just, having to increase my prices £10-15 above everyone else would equate to a considerable drop in bookings especially with how things are at the moment!  If there is anything I would need to add to the contract to make it stronger I am all ears!

The reason I am asking this now even though I am below the threshold is just so I can put things in place or I am ready for if I do need to resgister!

Thanks in advance

Bookworm105

what does your accountant say?
are you a "disclosed agent"?

DullGreyGuy

I'd suggest you want and need proper tax advice from someone qualified to give it and with indemnity insurance in place should they give you bad advice. 

Tucosalamanca

It sounds like there's a number of issues at play here, it's not just a VAT question.

As above, you need quality advice. What does your accountant think?

TheSpectator

My take is that the customer is paying your business for the service despite what the HR contract states - you will find plenty of 'clever' stuff fails at Litigation.

So, as stated above, get proper advice covered by indemnity. 

Grumpy_chap

The OP really needs professional advice as it seems as though the reality of what happens may not reflect what the paperwork may suggest happens.

The paperwork seems to suggest that each customer pays the individual massage therapists who, in turn, pay the OP.

The reality appears to be that each customer pays the OP who, in turn, pays the individual massage therapists.

uknick

From the example you give, if treatwell receive £100k and they pay that to you, your turnover is £100k and over the VAT threshold.  The £60k you cite is your profit on sales, not turnover.

If you were one of my clients this is what I'd tell you.  I would also tell you to raise sales invoices against treatwell for the £100k and then purchase invoices against each masseuse for their amount of £40k thus giving a full audit trail accounting for the £60k profit.  You don't have to send them, but retain them in case somebody, probably HMRC, want to audit you.

We have a client who does a similar thing in that they are the middle man for various contract staff working for different end clients. 

victor56

uknick said:

From the example you give, if treatwell receive £100k and they pay that to you, your turnover is £100k and over the VAT threshold.  The £60k you cite is your profit on sales, not turnover.

If you were one of my clients this is what I'd tell you.  I would also tell you to raise sales invoices against treatwell for the £100k and then purchase invoices against each masseuse for their amount of £40k thus giving a full audit trail accounting for the £60k profit.  You don't have to send them, but retain them in case somebody, probably HMRC, want to audit you.

We have a client who does a similar thing in that they are the middle man for various contract staff working for different end clients. 

Perfect thankyou, the Treatwell system has all of this information readily available and I can see what everyone has earnt, so will get a file together of all that information!