Commission deducted from Sales receipt

Question

Hi. 
 We carry out work for a Lettings Agent who are paid commission @ 12.5% on all works they have referred to us. 
 We invoice for the works carried out plus vat. e.g. &pound;298.00 + vat &pound;59.60 = Total Invoice &pound;357.60 
 The lettings Agent pays the invoice minus the 12.5% commission on the full value of the invoice e.g. &pound;312.90 so a difference of &pound;44.70 (commission &pound;37.25 + vat &pound;7.45 = &pound;44.70 
 So obviously when I allocate the receipt to the invoice I have an outstanding amount of &pound;44.70 on their account. 
 How do I rectify this? Is there a VAT issue with this too? Will I have to do an entry which breaks down the commission and VAT? 
 Struggling to get my head around this so would appreciate some help.

Anth Richardson · Answer

Hi Debris, 
 Thanks for using Sage City. 
 To try and give you a hand with this, it's worth mentioning that there isn't a built-in function to automatically deduct the commission. So you'd need to manually work that in. You could do that by: 
 
 Issuing the invoice as normal. 
 Once payment is made, allocate the payment to the invoice. 
 Record a credit note, to a nominal ledger specifically for the commission (you will need to create one), from the remaining sales invoice. 
 Once allocated, the invoice will be paid. 
 
 Regarding the VAT, an internet search tells me that fees associated with lettings aren't subject to VAT, however as we're not experts in that field I'd suggest checking with HMRC, or your Accountant (or possibly there's one here on City who can help!). From a Sage perspective though, it's always best to match up the VAT rates selected on both the invoice and the credit note/associated payments so all elements are treated the same on your VAT Return. 
 I hope this is helpful, do let us know if you need any further help 
 Regards, 
 Anth 
 Sage UKI

Sage Accounting UKI

Commission deducted from Sales receipt

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