Agent Commission

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1

Apologies as I have tried to get advice on this before (and I still don’t understand!). I am freelance with a number of clients who contribute to a pension scheme on my behalf - I also make pension contributions.

Clients pay monies owed to my agent who deducts 10% + VAT (all parties are VAT registered).

I submit my VAT via QuickFile. I invoice the client but the money is then sent to my agent - so the names on the sales invoice and the receipt in the bank don’t marry up. As I am invoicing for one amount and receiving a different amount (because of deductions), the numbers don’t tally either.

Currently I raise a sales invoice to the client and a purchase order to the Agent for services received so I can account for VAT paid and received (all parties are VAT registered).

I understand there’s a workaround if you create an agent bank account BUT (despite having looked at it many times!) I still don’t understand how this works.

If somebody could explain in really simple steps how I should be accounting for this in QuickFile – including which parties should be invoiced/charged; who money should go to and from in bank accounts; how pension payments should be accounted for - it would be very much appreciated.

There is a worked example below:

I INVOICE CLIENT FOR:

Fee £2867.40

Client’s pension contribution £150.26

VAT £603.53

                                   **Total**  **£3621.19**

THE MONEY OWED THEN GOES TO THE AGENT

I THEN GET A STATEMENT FROM THE AGENT WITH FOLLOWING DEDUCTIONS:

Agent Comm (10%) £286.74 + VAT £57.35 = £344.10

Client Pension Contribution £150.26

My Pension Contribution £100.18

                                  **Total deductions:       £594.54**

THE AGENT THEN PAYS MONEY OWED INTO MY BUSINESS BANK ACCOUNT

The amount received is the total £3621.19 minus deductions £594.54 (agents commission/pension contributions) = £3,026.66

So as it stands:

I have invoiced the client for £3621.19

I have received £3026.66 from the agent into my bank account.

The bank feed won’t reconcile this.

Sorry about long post. Please explain as if you are speaking to somebody who is very very stupid - which I clearly am. :slight_smile:

2

That’s a very common situation for freelancers, and it’s completely understandable why the current process is causing headaches! You are definitely not stupid—the accounting rules for agents and deductions can be genuinely confusing.

The best way to handle this in QuickFile is by using the Agent as a “Virtual Bank Account” (or client money account), as you’ve heard. This allows you to track the gross invoice amount, the agent’s fees, and the payments clearly.

Here is a step-by-step breakdown using your example, explained simply:

:rocket: Step 1: Create the “Agent Account” (Virtual Bank)

First, set up a new bank account in QuickFile to represent the money the agent holds on your behalf.

  1. Go to Banking on your QuickFile dashboard.

  2. Click New Account and name it something like “Agent Holding Account” or “Agent Client Money Account.”

  3. Set the start date and opening balance to £0.00.

This account will be a clearing account that records the full amount paid by the client and the subsequent deductions and final payment to you.

:memo: Step 2: Invoice the Client (The Sale)

You are correctly invoicing the client for the full gross amount. This is your actual sale.

Description Net Amount VAT Gross Amount
Fee £2,867.40 £573.48 £3,440.88
Client’s Pension Contr. (No VAT) £150.26 £0.00 £150.26
Total £3,017.66 £573.48 £3,591.14

(Note on VAT: In your example, 2867.40 x 20% = £573.48, which is slightly different from your quoted VAT £603.53. I’ll use the correct 20 figure for VAT on the Fee: £573.48. The pension contributions are usually outside the scope of VAT.)

Action in QuickFile:

  1. Raise the Sales Invoice to the Client for the Full Gross Amount: £3,591.14 (using my corrected VAT calculation).

  2. When the client pays the agent, go to this invoice and Log Payment.

  3. Select the Agent Holding Account as the bank account the money was paid into.

  • Result:

    • The Sales Invoice is marked as Paid.

    • Your Agent Holding Account now has a balance of £3,591.14.

:money_bag: Step 3: Account for Agent Deductions (Agent Commission/VAT)

The agent’s fee is an expense for your business, and it includes VAT that you can reclaim.

Action in QuickFile:

  1. Go to Banking and select your Agent Holding Account.

  2. Click Tag New Transaction > Money Out.

  3. Date: Use the date the agent sent the statement/payment to you.

  4. Amount: Enter the Agent’s Commission (Gross): £344.10 Net £286.74 + VAT £57.36).

  5. Description: “Agent Commission - [Client Name]”

  6. Tag as: Payment to a Supplier > Create/Select the Agent as a supplier.

  7. Create a Purchase Invoice from the agent for this amount, ensuring the Net £286.74 and VAT £57.36 are correctly applied.

  • Result:

    • The Agent Holding Account balance is reduced by £344.10.

    • You have a Purchase Invoice that correctly accounts for the Input VAT you can reclaim.

:old_woman: Step 4: Account for Pension Contributions (Money Out)

The pension payments are simply money moving out of your income to the pension provider. Since the agent handles both your contribution and the client’s contribution, you must record two separate payments from the Agent Holding Account.

Action in QuickFile:

  1. Go to Banking and select your Agent Holding Account.

  2. Click Tag New Transaction > Money Out.

Contribution Type Amount Tag As
Client’s Contribution £150.26 Transfer between accounts >Select a suitable P&L Account Code (e.g., “Wages & Salaries” or a dedicated “Pension Contributions” P&L code) to reflect that this is income you have paid out.
Your Contribution £100.18 Transfer between accounts > Select your “Director’s/Partner’s/Owner’s Pension” P&L Account Code.

  • Result:

    • The Agent Holding Account balance is reduced by the total pension contributions (£250.44).

    • Your P&L correctly reflects these payments.

:white_check_mark: Step 5: Receive Payment (Money In)

This is the final net payment from the agent that lands in your Business Current Account.

Calculation of Final Payment:

  • Invoice Gross: £3,591.14

  • Agent Commission (Gross): £344.10

  • Client Pension Contr.: £150.26

  • Your Pension Contr.: £100.18

  • Net Payment to You: £3,591.14 - £344.10 - £150.26 - £100.18 = £3,196.60

    (This is £170.00 more than your stated £3,026.66 because of the VAT correction from Step 2)

Action in QuickFile:

  1. Go to Banking and select your Business Current Account.

  2. Find the incoming amount of £3,196.60 from the Agent.

  3. Click Tag > Transfer between accounts > Select the Agent Holding Account.

  • Result:

    • The transaction in your Business Current Account is reconciled.

    • The Agent Holding Account balance should now be £0.00, or very close to it, clearing everything down until the next month. This is the key to reconciliation.

:key: Summary of Key Changes

Item Old Method (Issue) New Method (Solution)
Bank Feeds Bank feed shows Agent £3,026.66, but invoice is Client £3,621.19 (Won’t reconcile). Bank feed shows Agent £3,196.60 and is tagged as a Transfer from the Agent Holding Account (Reconciled).
Gross Sale Invoice to Client Invoice to Client, then Log Payment into the Agent Holding Account.
Agent Fee Purchase Order to Agent (Manual process). Money Out of the Agent Holding Account and tagged to a Purchase Invoice from the Agent (Easier VAT reclaim).
Pension Unclear where it’s accounted for. Money Out of the Agent Holding Account and tagged to the correct Pension P&L codes.

The Agent Holding Account is the secret sauce—it acts as the middleman to record the full money flow, allowing your main bank account to reconcile with a simple transfer.

Would you like me to clarify any of the steps, or perhaps run through another worked example?

1 Like
3

Thank you so much for your quick and very comprehensive reply. I’ll give this a go and if I’m still stuck will come back here and ask! Your help is very much appreciated.