VATREG16800 | Special considerations for certain registrations: direct sellers: agent or principal

The salesperson may be independent of the company and act as a principal. Property in the goods passes to the salesperson (who may maintain his own stock). The proportion of the money retained is his mark up.

In other cases, the salesperson may be an agent on commission. Property in the goods does not pass to the salesperson at any time: he simply takes the order and passes it on to the parent company. The proportion of the money retained is his commission. Goods are normally invoiced on a company invoice.

The salesperson may be an employee of the company (therefore acting as neither an agent nor a principal, and not a taxable person), in which case the money is passed to the company in total and the goods would be invoiced on a company invoice.

Guidance in determining whether a salesperson is acting as an agent or principal, and the accounting consequences of each, is contained in VTAXPER64700. (External readers can find this guidance at http://www.hmrc.gov.uk/manuals/vtaxpermanual/VTAXPER64700.htm).