Declare pass-through items correctly for tax and contractual purposes on a third-party account.
Dear Sir or Madam,
I am a sole proprietor in the tutoring sector and acquire clients (mostly parents of children). I pass on these orders to self-employed tutors, who then fulfill the orders at the customer's home. Now I have realized that I will soon no longer fall under the small business regulation, because in the contracts with the parents so far, I am the contracting partner, the fees all go to my account, and I declare them as my turnover to the tax office.
However, in reality, this high turnover does not reflect my actual entrepreneurial activity: Since I primarily acquire the orders and then pass them on to the tutor who then provides the service. The parents' fees are basically a "pass-through item" on my account, as the tutor receives over 50% of the monthly amount from the parents. The tutors themselves are not subject to VAT.
I aim to achieve the following:
1. I would like a tax-compliant approach that takes into account that the majority of the monthly amounts from the parents go to the tutors.
2. I am looking for a solution in which both myself and the tutor are credited with the actual turnover, as both I and the tutor are self-employed individuals who have entered into a cooperation agreement with each other.
I have thought of two future models that I would like to briefly introduce to you:
Model 1:
The tutor, as an independent contracting partner, enters into the tutoring contract (usually a time contract for 6 months) with the parents. For this purpose, he uses a form provided by me, which provides for a 6-month time contract and specifies the monthly payment amount and due date of the payment, so that no separate invoice needs to be issued. The contract with the parents also includes the name, tax number, and address of the tutor. The parents are aware that I am simply the intermediary and that the service is provided by the tutor with whom I have a cooperation agreement. As the intermediary, I take care of the regular payment from the parents and contractual formalities towards the tutor. The parents are welcome to contact me again if they find that the tutor I have arranged is not suitable. The percentage split of the monthly payment amount from the parents and the different services that I and the tutor provide within this partnership are regulated in a separate bilateral cooperation agreement between me and the tutor.
The parents' payment goes to an account set up specifically for this purpose in my name, where I manage the money in trust and transfer it to the tutor upon his request and at the same time transfer my fee to my business account. I treat all the money as the tutor's money and do not have discretionary control over it.
The following information is taken from the answer to a question asked in your forum, in order to meet the criteria for so-called pass-through items:
Asked on 26.02.2012
2:22 p.m. | Fee: € 40.00 | Status: Answered | Views
