There have been endless discussions in the meeting rooms, accountants, and advisers of tutoring agencies about the view that HMRC take on agencies paying VAT on just their commission, or the whole amount charged to the client. We at TutorCruncher designed our software for companies that work in a way that works out your invoices for you, including this complicated tax setup of VAT setup of VAT on just the agency's take. As long as you are acting as an agent and not employing your tutors or offering services other than introductions, that you can only pay VAT on your commission. We have been made aware of correspondences with HMRC in which they outline their official ruling on the matter.
Although we do not give tax advice we are happy to introduce you to our accountant who understands the tuition industry well. Many tutoring companies operate as agencies so it is the tutors who supply the tuition not the company its self. The following are some steps you might take towards establishing your company as an agency and make it clear that your company is not the supplier of tuition services.
- The tutor is registered as self employed
- The tutor contracts directly with the client to provide his/her services to that client
- Any contracts make it clear that your companies role is limited to introducing the tutor to the client
- You invoice clients on behalf of the tutors using the TutorCruncher paperwork layout and calculations.
- You invoice the tutors for a commission (plus VAT depending on your turn over) rather than invoicing the clients for tuition
- You do not control the tutors supply of tuition services ie you don't supply materials, you don't tell them what time to teach where etc
HMRC will not give a general ruling due the subtleties of how you manage your tutors and whether they deem that you control them or not. However if you do manage to maintain a position as an agent for tutors then you could save roughly 12% of revenues which for most businesses is their entire profit margin! TutorCruncher has a specially designed invoicing system that will work it all out for you as well so you don't have to worry about the complex maths of 20% of just your take of every lesson. This can all be done for every one of your tutors with one click each month. Please contact us if you would like to discuss this, or to arrange a demonstration of our software.