VAT between unregistered and registered businesses

musicband

We are a band of amateur musicians.  We performed at a venue which ran the box office selling tickets for our show.  We negotiated a profit share arrangement with the venue whereby they would pay us 75% of the ticket money and they would keep 25%.  We are not vat registered but the venue is.  The venue want to deduct vat from our share of the money so they effectively pay us 75% of the ticket money minus another 20% to cover the vat - is that how it works?  We were hoping they would simply be able to pay us the full 75% as we are not registered for vat, and as a registered business they'd sort out their own vat on just their 25% share? 

caprikid1

Unfortunately they have collected 20% of the ticket price for the government, that is non negotiable I believe.

eskbanker

If 20/120ths of the gross sale revenue went to HMRC, I can see why they'd only consider splitting the remaining 100/120ths, i.e. your share would be 75/120ths (rather than 75% "minus another 20%").

musicband

Thank you for the responses so far and understand the position.  But just to add to the confusion - as a band we sometimes do it the other way around by running the box office ourselves (via an agency like TicketSource who simply sell the ticket for say £25 and pay us the £25, and separately charge the customer a booking fee of say £1.50 on which they do charge the customer VAT). We collect the full 100% of the ticket sales money and then pay 25% of that as a profit share from us to the venue. As the band is not registered for vat we obviously don’t mention it and simply pay them 25% of the total. As a band we take our full 75% and presumably the venue then has to declare the vat element on just their 25% incoming share. Is that all correct and proper and a legitimate way around us losing out on the alternative arrangement of when the venues run the box office and pay us minus the vat?

NorthYorkie

VAT is chargeable where a 'supply' is being made by a VAT-registered trader. In the first case the venue is making a supply to you and is correctly charging you VAT - the fact that you are not VAT-registered is irrelevant.
In the second case you are paying the venue 25% of the ticket price which I would say is a VAT inclusive price (i.e. for each £100 of ticket price you pay them is really £83.33 plus VAT of £16.67 which they have to pay to the Revenues, in addition to the VAT of the booking fee). Incidentally, despite the name you put on it, in the second case this is not a 'share of profit'; it's fee for handling the bookings.

Have you considered whether it  would be beneficial for your group to be voluntarily VAT-registered? Maybe you need professional advice.