We run an events business and at the end of each event we are left with a profit, which we share amongst the partner organisations. If, lets say, the profit is £10k shared between five partners, should each party receive £2k or £2k plus VAT? We have just received an invoice from the first partner for £2k plus VAT, but I'm questioning whether we should pay them the VAT amount on top of the £2k?
Hi,
If it is genuine profit sharing then there should not be any VAT charged.
However, if they are recharging you some of the costs incurred then there maybe charge for VAT. It depends on circumstances.
Why is this partner invoicing you if it is about sharing profit?
Thanks
You are being invoiced for the partner organisations services which if they are VAT registered will have to have VAT added.
Are you VAT registered? If not you are going to have to rethink the amount of profit that you have available for redistribution to the partners (would come down to around £1667 per organisation otherwise you will be asking the VAT registered partners to take less than non VAT registered partners).
If you are VAT registered then it's not a problem as the VAT you would have passed to HMRC is simply offset against that paid to the partner organisation.
kindest regards,
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
sorry, I started answering this and then got waylaid on a call.
I think that there is some confusion here over the wording in that these do not appear (to me at least) to be partners as such but rather other organisations who are paid on a contingent fee basis.
Maria,
I think that your wording is causing some issue in that you are talking about profit share and partners where (I could be reading this wrong) I believe that this is more akin to a commercial arangement with fee's based on profit levels.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
