Actor's Agency - VAT on invoices to production companies if client (actor) is not VAT register

We are a small actor's agency and recently decided to register for VAT but are now wondering whether this was in fact the correct decision because it may actually transpire that our taxable 'supplies' will be nowhere near the threshold. Having conducted further research and read numerous articles it seems that we were mistaken in thinking that there would be a requirement for the Company to charge VAT on invoices to production companies for services that are provided by our clients ('actors') if our clients are themselves not VAT registered. As none of our current clients are VAT registered - I am unaware of any actors who earn below the VAT threshold as being VAT registered - it seems somewhat pointless to be VAT registered, other than the small benefit of reclaiming VAT on our outgoings for operational costs. I have read articles saying that if the Agency is VAT registered then you have to charge VAT on the invoice to the production company and that you also have to charge VAT on the commission element that you charge the Client (actor). So for example if the actor has undertaken a shoot and the total for that shoot (the buyout, basic studio fee etc) is £1000 then the Agency raises an invoice to the production company for £1200 (£1000 + £200 VAT). The Agency then has to charge VAT on the commission element (10% of £1000) which would mean charging the actor £120 (£100 + £20 VAT). On the other hand people are saying that unless the actor is VAT registered then the Agency does not charge VAT on their invoice to the production company. We operate a system where the actor invoices the Agency so before we were VAT registered and using the example above the actor would have invoiced the Agency £900 i.e. £1000 minus 10% commission of £100. Simple! The Agency never raised invoices to the Client (actor) it was always the actor invoicing us. If the first scenario is the correct method them I am presuming that the actor would invoice the Agency for £880, this being the fee of £1000 less £120 i.e commission of £100 (10%) + VAT of £20. I read a forum article in which 'HMRC Admin 21 Response' provided an answer to a question that related to an actor's agency and VAT so wonder wether they would be able to assist please if they are a specialist in this area? Thank you

You can't rely on HMRC giving you advice when the answer is "it depends on the contractual nature of the supply you make". You are either acting as an (agent )on behalf of the talent or you are buying in the services of the talent and selling it on under your own name (principal), I would have thought the clue was in your description "small actors agency", an agent brings a seller and a buyer together, like eBay does, an agent doesn't sell anything other than their finders fee, again, like eBay. Most talent agencies operate as an agent, not as a principal, but it does depend on what the contracts says, the contract between you and the talent and the contract between you and the studio/production company. As an agent, you would typically charge a commission or fee to either the talent, the studio or both, the commission is your turnover for VAT registration purposes, the money that passes through you that belongs to the talent is nothing to do with you other than it comes through you so that you can i) ensure the talent fee is correct and ii) you can calculate your commission correctly. "On the other hand, people are saying...." you cannot rely upon the internet or man in the pub to ensure your business is compliant, you've already potentially registered for VAT in error, you have a fiduciary duty to get things right and DIY tax advice only works on simple stuff. In your post you refer to "the actor would have invoiced the Agency £900 i.e. £1000 minus 10% commission of £100. Simple! The Agency never raised invoices to the Client (actor) it was always the actor invoicing us." but there are some issues here too, the Actors fee is £1,000 so why are they raising an invoice for £900? The actor bills you £1,000 (this is your cost/expense), you then invoice the actor for your fee of £100 (this is your sale), but what you are describing is the actor is already deducting your fee from their fee but this is wrong, the actor is now under declaring their sales on their own tax return. The actor cannot net off your fee against their fee, that is not how accounts work, if I want to charge you £1,000 but you also want to charge me £500 we don't just both agree to invoice each £500 because my fee is £1,000 (income) and your fee is £500 (expenditure) and the net might well be £500 but you can't net off one from the other. Based on the "old" method you describe above, it appears that you are indeed acting as a principal, you are buying in the services of the actor and then reselling those services, whereas the first part of your post you describe what appears to be an agent relationship where you are just the middleman between an actor and a studio. Once you decide which business model you want to operate under, then get your contracts to reflect that business model and then you may be able to deregister for VAT. It'll be impossible for HMRC to answer this when you don;t know whether you are an agent or a principal, I think you want (and need) to be an agent, link below to HMRC guidance to help you with the concept that is "agent". https://www.gov.uk/hmrc-internal-manuals/vat-taxable-person/vtaxper36580

Hi Emma A.
The extent of your taxable supplies will depend on whether you are acting as a disclosed or as an undisclosed agent.
Please see the guidance below:
VAT guide (VAT Notice 700) 22. Supplies made by or through agents
VAT guide (VAT Notice 700) 23. Invoicing arrangement for supplies made by or through agent
If your taxable supplies are above the threshold then you will need to remain VAT registered.
Thank you.