I have a new client (hurray!) which operates similar to a payroll umbrella I suppose, but deals with self employed contractors. If I'm correctly informed, recruitment agencies can only pay contractors via PAYE or if the contractor is a limited company. My client has arranged it so that the contractor signs a contract with them which makes them a self employed contractor. As a result my client doesn't have to deduct tax and NI as the now self employed contractor is responsible for their own tax affairs.
This client works with the agencies, so the agency will forward the timesheet to my client. My client then charges the agency the gross wage plus vat. This is then paid by the recruitment agency usually the same day. My client then pays the gross wage less a commission charge to the self employed contractor.
My client is VAT registered and I can clearly see the VAT on the sales invoices raised to the agencies.
I'm just wondering though, the commission that is deducted from the pay, would this be vatable? I'm assuming its not as its already been included in the gross invoice to the agencies, but as its taken me a while to establish the workings of the business I was wondering if someone could confirm this for me please.
