VAT may be calculated on the ‘net of commission’ fee provided that the set-off is correctly described on the invoice (see methods A and B below).
Item 6 of VAT Notes No. 1 1988-89 published in April 1988 states:
‘Many traders when charging fees to their clients reduce the amount by taking into account commission they receive from third parties. For example, a financial adviser provides guidance on insurance to a client; the insurance company pays the adviser a commission and the adviser passes on the benefit to the client by charging a lower fee.