VAT: Agency Arrangements for Yoga Courses and Workshops

A source of confusion and upset can be when a non Vat registered yoga teacher runs a course from a Vat registered studio on a split revenue basis.

The issue arises when expectations vary on whether the split will be pre or post Vat.

For Example:

• A workshop is being run which brings in gross revenue of £10,000. The studio hosting is having 40% and the teacher 60%.
• Suppose the studio is VAT registered, and the teacher is not.  There are two choices as to how the proceeds split.
• If the split 60:40 is worked out on the gross £10,000 then the studio receives £4,000 and the teacher £6,000.  The studio has to pay Vat of £1,667 (on £10,000) on its share, leaving it with £2,333.
• If the split is worked out after VAT, then from £10,000 with Vat of £1,667 is deducted and the net £8,333 split 60:40.  The teacher receives £5,000, the studio £3,333.
• Arrangements like this need to be properly documented to avoid disappointment – we’ve been consulted a number of times by Yoga Teachers disappointed to be receiving a split after VAT.

Disclosed Agency

A way to resolve this problem is to work with a “Disclosed Agency” – this means:

• The studio discloses publicly it is acting as agent for the teacher.  It doesn’t have to disclose the percentage split.
• This disclosure must be prominent in booking information and receipts.
• With a disclosed agency the Studio only pays vat on its share of the revenue.

Using the example from above:

• Gross revenue £10,000 – £4,000 studio, £6,000 teacher.
• Studio pays VAT on £4,000 rather than £10.000.
• VAT liability is £667.  Studio nets £3,333.  Teacher £6,000.

Agreements

In situations like this its important terms are agreed before the workshop is run, and both parties are clear about how vat works, preferably by exchange of letters / emails:

• Percentage Splits.
• Whether these are on post VAT or pre VAT income.
• Whether a disclosed agency is being run.
• How costs of the event are being split.

If the agency is not disclosed – it is then undisclosed – and the treatment is as per the first example.