Do I Have To Be Vat Registered To Sell On Groupon
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- #21
Annotation: The normal toll of your product/service should not be considered, relieve for the case where a loss is made in the deal price.
1) Groupon accuse customer the full voucher cost of say £50, VAT of 21% included.
2) Groupon charge fifty% PLUS VAT (25+5.25=30.25) for their service, leaving the customer (y'all) with £19.75, of which you lot pay income/corporation taxation on. You don't pay VAT, as yous have not collected VAT.
3) Claim the VAT that Groupon charged (£v.25) for their marketing charges. This amount does not class part of your taxable profits and will merely be applicative to you VAT payable/repayable amounts.
Hi,
I am far from an expert in this area but it doesn't seem that anyone is really paying HMRC whatever VAT for the bodily production being sold using this model.
I can't imagine Groupon are paying HMRC 20% of the £l voucher value and the retailer isn't paying HMRC anything, only challenge the VAT on Groupon'due south fee.
Surely someone has to pay HMRC twenty% of either the amount the customer paid (in the instance virtually information technology's £50) or the full value of the voucher (£100 in the example above).
I remember information technology is likely, y'all volition have to pay VAT on the corporeality that the customer paid for the voucher (£l in the to a higher place example) and pay that to HMRC.
Phillip
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- #22
Post-obit my previous note I spoke with an ex-collegue who managed Groupon with my previous employer. I believe you will be invoiced on the following footing:
Groupon voucher value £20
Customer paid value £10
VAT on paid value 20% of £10 = £2
Groupon charge 50% of paid value = £five
Invoice from Groupon VAT + fee = £two + £5 = £vii
And then in this example, your cost of goods/services plus cost to serve had better exist £three or less ;-)
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- #23
Why on earth wouldn't Groupon accept to accuse VAT at normal rate when it sells the vouchers, on the corporeality charged for the vouchers (not their face value, of course, that is irrelevant because the vouchers enforce a discount on the ultimate supplier)? How would Groupon avert that other than fraudulently?
- #24
The more than i looks at the Groupon model the more it becomes obvious that it is very attractive for the cease customer, very attractive for Groupon, and a encarmine atrocious proposition for the retailer...
- #25
I agree that someone has to but in the example the person gave, Groupon were invoicing VAT for their fee (e.g. 50% of the customer real cost) and non VAT on the customer real cost. If you run into my follow upwardly mail service, y'all will meet that I believe that they invoice their fee plus the VAT on what the customer paid. Nevertheless, information technology's a bit of a mess and from what i empathize, the Groupon staff don't fully understand.
- #26
I was looking for advice on this very issue and came across this thread. I idea the answer should exist straightforward merely it appears non!
The way I have done this is to business relationship for sales VAT on the price paid by the client for the voucher. I don't think that Groupon accounts for VAT on sales and therefore we have to.
Groupon's terms and conditions state:
- #27
Thankfully I am not VAT registered, and even more than thankfully I take not yet had to resort to using Groupon to drum upwards business concern.
Still, if I had to do both of these, I recall I would simply enter the monies received from Groupon as sales receipts, and declare VAT on that amount.
The amount paid by the customer to Groupon - or the face up value of the vouchers - is irrelevent to me from a bookkeeping signal of view. All that counts is the money I receive.
When a customer redeemed a voucher I would just record the details in a manual ledger for my own reference. I would certainly non put annihilation through the till as this would just confuse matters.
And so, when money arrives from Groupon, I would enter the details as a sales receipt and declare the VAT componant.
What can peradventure be wrong with doing information technology like this?
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- #28
However, if I had to do both of these, I think I would simply enter the monies received from Groupon as sales receipts, and declare VAT on that amount.
...
Then, when money arrives from Groupon, I would enter the details as a sales receipt and declare the VAT componant.
What tin can possibly be wrong with doing it like this?
The problem with this is that you have a VAT invoice from Groupon stating the VAT paid on their commission. If you just paid to HMRC sales VAT on the actual greenbacks you'd received, it'due south more than probable this would exist less than the VAT you're reclaiming.
In my business nosotros practice a partial exemption VAT calculation, then it's very important to get the sales and buy VAT elements right.
- #29
I accept now spent quite a fleck of time working on a deal with Groupon over the last few weeks and over the concluding 2 years ran about 10 deals with them at my previous employer.
This is what I confirmed/agreed with Groupon last week:
Customer paid amount = £y
-This is ordinarily a l% or greater discount of the 'value' it represents
-Although they now say they will only take 60% discount
Groupon merits that they pay HM Revenue VAT on what the customer pays i.e. £y
-In the Britain they pay HM Revenue 20% of £y
Groupon charge yous their % fee on £y
-It's important to note that their % fee is on the full inc. VAT amount paid by the customer
Groupon will keep the revenue from customers who do not redeem the voucher with you
-Unless y'all can negotiate otherwise
When Groupon UK pay you they will pay
£y - (VAT of £y) - (Agreed % fee of £y inc VAT)
In my experience y'all will receive between 30% and 45% of what the customer actually paid.
-This will therefore exist about 17% to 23% of your normal inc. VAT retail toll
Therefore it'due south very hard to break even allow solitary make a turn a profit on Groupon unless:
-You have incredibly low % cost prices (I'd guess y'all demand to be at x% cost with virtually no price to serve)
-You believe a large % of customers volition echo purchase at the normal price
-Y'all take meaning other products available and believe a large % of customers volition upwards-sell using the voucher
I accept quite a chip of experience with these guys, private bulletin me if you would similar some assist on the economics or in working out a ameliorate deal with them.
- #30
Hmmm curiouser and curiouser.
When I read that Groupon "claim that they pay HM Acquirement VAT on what the customer pays", I called them straight abroad. To be honest they weren't that clued up on VAT but the lady did check with someone and confirmed that they do
notcharge VAT on the auction of the vouchers (and this is what is stated on their website too).
They were a bit dislocated by the terms sales VAT and input VAT, and started by telling me that they do collect VAT, but what they meant was just on the committee invoice they send to me. Did yous become anything in writing, or is information technology possible they made a fault in telling you what they did?
- #31
I went into this with my accountant in some detail today. Based on what they found out (and this included a couple of calls to groupon), it works something like this. Excuse me for my terminology.
Groupon sell a £l voucher (could be discounted from 1Million. Doesnt upshot VAT)
Understanding states 50% committee (their fee), and then £25. They call this "Net total Fee Value"
They add £5 VAT onto their commission then their fee increases to £thirty (at twenty% VAT).
So what they call the "Gross Value of Invoice" is £30.
This means the the retailer gets paid £twenty.
The retailer tin can business relationship in two different ways and information technology makes no departure which way.
1) They go responsible for the VAT on the full £50 of the voucher (ie £8.33) and so repossess the £v VAT added by Groupon. And so cyberspace event is 8.33-five= retailer owed HMRC £3.33. Meaning after settling up with HMRC the £twenty groupon gave retailer goes downwardly to £16.67. This is 33% of the £l voucher cost.
2) The other way of calculating it is to ignore the groupon VAT invoices sent to the retailer. Just ignore everything they ship you. If you just treat the money groupon send you lot equally income then y'all have to take VAT out of that every bit with any auction. So of the £20 groupon send you, £three.33 has to be considered VAT however leaving you with £16.67.
Either fashion HMRC get all the VAT owed on the £fifty which should exist £viii.33
As far as I tin work out this substantially ways that groupon get the retailers to pay their VAT. When I signed up with groupon I was told it was a good thing that I was VAT registered because I could merits back VAT. In fact the opposite is true and unregistered companies become a college pct of the voucher. It came every bit a daze when I would out how little of the voucher price I at present ultimately end up with.
If this is wrong, please tell me as I would actually like to find out I get more than than i/3 of the voucher price.
- #32
Unfortunately I agree with you dance621.
I think what is really happening in this situation is Groupon is acting as an agent and selling YOUR £50 voucher.
It doesn't mean Groupon are getting yous to pay their VAT though, the customer pays the VAT, it'southward just who accounts for it. If Groupon did pay it so they'd pay you £41.67 minus their commission. But they send yous £l minus the committee and get out you to account for it.
Y'all can't merely pay VAT on the portion you receive equally this is not technically the amount of your sale. Your auction is £fifty inc VAT and so y'all accept an expense which is deducted, commission of 50% plus VAT. The corporeality of Groupon'southward auction is £25 plus VAT so they are paying £5 VAT to HMRC.
It took me a while to get my head around this but I'1000 confident that's how it works and it makes sense for me now. It'south just the manner that commission is deducted from the voucher payment that creates the confusion. Think of information technology as if they didn't deduct commission but invoiced you for it later on.
If anything it'south a good demonstration of how overpriced they are and how unsustainable the model is. The scandal is they are making more income than you and that'southward income not profit. Then you have to supply the production. The frightening thing is if yous sell ane,000 units on a £100 retail product, your total marketing cost is essentially £66,667. I wonder if you had that cash how many £100 units you lot could sell using Tv set ads.
That all said I'm non sure the best style to enter it in your accounts. I guess you lot'll invoice them £fifty for the sale and they'll invoice yous £xxx for the committee. I'm sure it will be piece of cake for your auditor to sort anyway.
- #33
Absolutely.
Shortly the penny volition driblet with retailers that Groupon represents appalling value. Already I'k getting the impression that many companies running Groupon promotions are on their last legs and that this is a desperate final throw of the dice to bring in some revenue.
What happens if the retailer goes bosom earlier y'all have a take chances to redeem the voucher? I judge Groupon will make a refund merely if it starts happening a lot and then Groupon'southward image is going to showtime taking a big hit.
My guess is that within five years we'll be asking "Whopon?" Not before a few blokes in the States have fabricated an awful lot of coin, though!
It's a fleck like a Ponzi scheme.
- #34
I think calling it a "scandal" is a fleck over the acme. Businesses enter into these agreements with their eyes wide open and should be well aware of the consequences. If it turns out that retailers are selling appurtenances below toll price then that'due south their sentry - little sympathy from me!
The deals work all-time on high-margin services, this is why a lot of them are for hotels, spas and meals. Also the promise is that the business concern supplying these volition get repeat custom but at the full price.
Simply I do agree, Groupon have to be laughing all the mode to the banking concern. Don't forget likewise that a significant % of vouchers are never redeemed, and it's Groupon who proceed the money for this too.
Ane affair I would add to anyone contemplating using them. No affair what they tell you, their 50% commission rate IS negotiable. We pay forty% and I'thou certain if nosotros used them more this would be lower notwithstanding.
- #35
But that doesnt add together upwardly. If they take off VAT as source then as you say £41.67 is left of the £fifty. Then with a 50% commission rate the payment into retailers banking concern would be one-half £41.67 so £xx.83. Merely the bodily amount that end upward with the retailer is just £sixteen.67.
This is how my auditor is handling information technology. I can but think that groupon have decided (and the contract signed is not clear) that groupon are entitled to l% of the whole voucher price ie £25 Afterward Vat has been deducted. so the £41.67 becomes £16.67 later on the £25 deducted. In essence they are taking commission on the VAT as well.
The way information technology is worded in the contact is "Success fee: 50% exc. VAT". In the small impress it reads...
4.2 For any Voucher that is Validly Redeemed by a Purchaser with Partner, Groupon shall pay to Partner the Groupon Voucher Price less the
Success Fee and likewise less any amount in respect of Value Added Tax ("VAT") chargeable by Groupon in respect of the Success Fee
("Groupon's VAT"). For the avoidance of dubiousness, Groupon shall retain the Success Fee plus Groupon's VAT. That payment shall exist made
within 7 of Groupon's working days of Groupon receiving from Partner suitable and valid evidence (the nature of which may be stipulated by
Groupon from time to time) evidencing that the Voucher has been Validly Redeemed - which testify Partner must: (i) provide to Groupon
using Groupon's online partner redemption portal; or (ii) exist sent to Groupon past post, fax or email; and for which, in both preceding cases,
such evidence must be received by Groupon within 28 days of the Voucher having been Validly Redeemed past the Purchaser of that Voucher,
with the Partner. If that evidence is not received by Groupon within that time, so Partner shall lose its right to receive any monies from
Groupon in respect of that Voucher (and Groupon may retain any monies that would accept been so payable).
4.3 Save in respect of Groupon's VAT, the parties concord and acknowledge that the payment or drove of any amount in respect of VAT (or any
fine, penalization, interest or surcharge imposed thereon) arising in connection with supplies made pursuant to this Agreement ("Partner's VAT"),
the issue of whatever VAT invoice in respect of Partner's VAT and the payment of any amount in respect of Partner's VAT to Her Majesty's
Revenue and Community ("HMRC") shall be the responsibleness of Partner, equally opposed to Groupon. If Uk VAT constabulary or HMRC practice changes
such that Groupon becomes liable to make any payment to HMRC for VAT (other than Groupon'south VAT), Partner agrees that Groupon may
unilaterally vary the fiscal provisions of this Agreement to produce the result which would have been achieved for Groupon, had that
modify not occurred.
4.4 Groupon may ready off against any amounts payable to Partner against whatever payment of any amount owed by Partner to Groupon (or to HMRC,
if HMRC does, or is likely, in Groupon's reasonable opinion, to claim any VAT from Groupon); and any payment made past Groupon shall be
without prejudice to whatever claims or rights which Groupon may have confronting Partner.
- #36
It does add together up. You have agreed to pay fifty% of £50 which is £25 ex VAT.
They don't take off VAT at source, you lot account for the VAT of the full amount. It is your £l sale, their fee is a marketing expense.
Absolutely.
Before long the penny will drop with retailers that Groupon represents appalling value. Already I'yard getting the impression that many companies running Groupon promotions are on their concluding legs and that this is a drastic last throw of the dice to bring in some revenue.
What happens if the retailer goes bust earlier you take a hazard to redeem the voucher? I estimate Groupon will make a refund but if it starts happening a lot and then Groupon'due south paradigm is going to start taking a large striking.
My guess is that within five years we'll be asking "Whopon?" Not earlier a few blokes in the States have made an awful lot of money, though!
It'south a bit like a Ponzi scheme.
I'thousand non sure I retrieve the prices will just be driven down over fourth dimension. The committee and the disbelieve levels. You can already negotiate but I estimate they only practise if you take a great product. I doubtfulness the big national companies are paying l% committee as well.
Yep I don't mean scandal in the sense it'south a pre ordained scam. I but mean when you look at the overall figures on a deal information technology'due south 'scandalous', non just how much money they make but what your overall marketing cost is.
- #37
I completely get this now.
In that location are 2 means, both right for VAT simply 1 is wrong from an accounting perspective. Basically everything needs to be grossed upwardly for commission and sales. You can only take i/6 of what is paid over to the client to get the correct internet vat simply information technology is skipping a few steps. The big ruddy herring is that Groupon'southward vouchers are non field of study to vat when they are initially sold. In my instance HMRC become the correct amount of vat which is on the total sales value and everything is grossed up in the accounts.
Here is my explanantion to a client
"
The invoice is actually a contra invoice IE it is a sales invoice from SA's perspective and it is a commission invoice from Groupon's. You lot will need to account for information technology in two parts. Here are the entries for this detail invoice, annotation that the baking side of things is another issue
Invoice = £165.lx to be paid to SA.
PART 1
DR GROUPON DEBTOR ACCOUNT £414 (Gross sales)
CR SALES £345 (414 ten 100/120)
CR VAT £69 (414 10 1/6 or twenty/120)
That's the income side.
PART ii
DR Commission paid (or advertising) £207 (50% which is groupon'south fees and is subject to vat)
DR VAT £41.forty (207 X 20%)
CR GROUPON DEBTOR Account £248.twoscore ( This is Groupon's fees gross).
This is the commission side
Groupon pay over £414 (sales) less their fees of £248.xl (inc vat) = £165.lx.
VAT
You will end up with VAT due of £69.00 less £41.40 = 27.sixty. Which is the £414 less Groupon'southward gross fees £248.60 = £165.60 ten ane/half dozen = £27.60
Groupon account
You will have the £414 due to SA less the £248.40 due to Groupon leaving the £165.60 which is received from the bank
The alternative would be to but account for the £165.60 every bit gross but this would not prove the correct gross sales or commission paid."
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- #38
I agree that someone has to but in the case the person gave, Groupon were invoicing VAT for their fee and non VAT on the customer real price.
- #39
That is right. The original auction by groupon is non subject field to VAT. Bank check their terms and conditions.
HMRC still receive VAT of the total amount, EG:
Original auction - no vat as per groupon terms and rules for credit vouchers.
Groupon pay VAT on their fees which is £207 x xx% = £41.40.
The business organization suppliers pays this and so claims information technology back form HMRC.
However it is the business organisation supplier, NOT GROUPON who accounts for vat on the £414. Then the suppliers pays £414 10 i/6 or 20/120 = £69.
So is ultimately paid to HMRC at the full selling price (inclusive of vat). Information technology is just that Groupon only pay it on their fees as part of this procedure, which makes sense as their vatable income is fifty% of the full.
- #twoscore
That is right. The original sale past groupon is not subject to VAT. Bank check their terms and conditions.
HMRC still receive VAT of the full corporeality, EG:
Original sale - no vat as per groupon terms and rules for credit vouchers.
Groupon pay VAT on their fees which is £207 x 20% = £41.twoscore when they invoice the supplier
The business organisation supplier pays this invoice and then claims it back from HMRC equally input tax.
However it is the business concern supplier, NOT GROUPON who accounts for vat on the £414. So the supplier pays VAT on the full sale price £414 x 1/6 or 20/120 = £69.
And then VAT is ultimately paid to HMRC at the total selling price (inclusive of vat). It is just that Groupon only pay it on their fees equally part of this process, which makes sense equally their vatable income is 50% of the total.
HMRC get 41.forty from Groupon but the supplier claims this dorsum in input revenue enhancement. The supplier then pays vat on the total SP of £69.
Groupon has paid vat on their income, and the supplier has paid vat on their income and HMRC have received the total vat.
The supplier shows the income in their accounts of £414 less £69, and also shows the commission paid to Groupon of £207 (net of vat).
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Do I Have To Be Vat Registered To Sell On Groupon,
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