You’re an agent if you act for, or represent, someone else (your principal) in arranging supplies of goods or services. The supplies that you arrange are made by, or to, the principal you represent.
Principals cannot avoid their liability to account for VAT on their supplies or to pay VAT on their purchases by using an agent.
Persons who carry on a business on their own account sometimes use the words ‘agent’ and ‘agency’ to describe their trading style. For example:
# distributors, sole concessionaires and motor agents usually trade as principals on their own account
# employment agencies and travel agents are not usually agents in all their activities
On the other hand, some people who normally trade as principals, such as solicitors and architects, may occasionally arrange supplies as agents for their clients.
To act as an agent, you must have agreed with your principal to act on their behalf in relation to the particular transaction concerned. This may be a written or oral agreement, or merely inferred from the way you and your principal conduct your business affairs. Whatever form this relationship takes:
# it must always be clearly established between you and your principal, and you must be able to show to HMRC that you’re arranging the transactions for your principal, rather than trading on your own account
# you will not be the owner of any of the goods, or use any of the services which you buy or sell for your principal
# you will not alter the nature or value of any of the supplies made between your principal and third parties
Supplies made through an undisclosed agent are those where the supplier and purchaser are not known to each other as the agent acts in his own name.
Supplies of goods through an agent acting in his own name are treated as to him and by him and consequently count towards his turnover for VAT registration.