Agent income in Xero – Performance Accountancy – MTD

In this video we are looking at how to record agent income in Xero. This is particularly relevant for musicians, singers and performers who are paid through an agent rather than directly by the venue or engager.

For this example, assume you are using Xero Simple and you do not have any more room to raise sales invoices. In that situation, you may need to cash code the income directly from the bank account. Go to the bank account and open the reconciliation screen. In this example, I am looking for a payment from Meridian Artists. In real life, you should have the agent statement in front of you so that you can see the gross income, the agent commission, any VAT on the commission, and any withholding tax deducted.

The contact is Meridian Artists. The main income line should be coded to performance income, with a description such as income from agent. However, we also need to add the details, because the agent will usually have deducted their commission before paying you. In this example, there is also a withholding tax deducted. I am using Austria as an example, purely for demonstration purposes. The gross income is £1,500 and that is coded to performance income.

The agent commission is 15% plus VAT, which in this example comes to minus £270. That should not be coded against performance income. It should be coded to agent expenses or agent commission.

The withholding tax is separate again. In this example, it happens to be based on 20%, but we do not want it going to a normal expense account, because then it will feed into the accounts incorrectly. Instead, it should be coded to the withholding tax account, which may be account 930 depending on how your chart of accounts has been set up.

Once the gross income, agent commission and withholding tax lines have been entered, the total should match the amount received in the bank. You can then save the transaction and reconcile it.

There will also be cases where an agent pays you without any withholding tax. In that situation, the entry is simpler, but you still need to gross up the income and show the agent commission separately. For example, if the agent has paid you for a Royal Albert Hall engagement, you might use a  description such as February Royal Albert Hall. The gross income may be £1,000, coded to performance income. The agent commission may then be entered as minus £150, coded to agent commission. Once the total agrees to the bank receipt, you can save and reconcile the transaction.

You may be able to set up bank rules or products and services to make some of these lines quicker in future. For example, you could have an agent commission line pre-populated, apart from the amount. However, where agent statements include different deductions, foreign withholding tax or unusual details, it is often safer to do the entry carefully rather than trying to automate everything too aggressively.

That is how to record agent income in Xero when you need to show the gross income, the agent commission, VAT on the commission where relevant, and any withholding tax separately.