We recently helped a business which is the UK subsidiary of a US company defend an assessment HMRC had raised for commission received for acting as an agent. The assessment was for £28K and related to commission received in facilitating sales from the US to a company based in Leicester. HMRC viewed the commission as standard rated but as the commission was paid by the US parent in relation to sales it made in the US (the goods originated in the US) then we successfully contended that the place of supply of the agency services was where the underlying supply took place, i.e. America and that no VAT was due.

Our advice is that any assessments of VAT should be examined to see whether they are in order or not. In this case our client had ignored HMRC despite the fact that analysis of the transaction clearly showed no VAT was due. However, HMRC will and do assess where information is not forthcoming and they consider in their 'best judgement' that tax has been underpaid. Always review assessments as often they are designed to focus the mind.

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