Readers' forum : Germane point

I have a client who earns annual fees of about £40 000 from UK customers and £190 000 from a US business. All fees relate to commission earned on the sale of goods owned by the customers. However most of the fees earned from the US customer rely on the efforts of a German-based business that charges my client £100 000 each year for its services.

My client has never been VAT-registered in the UK but I understand he should have been because the payments to the German supplier are deemed to be his own taxable sales. Is this correct? My client does not want to register for VAT if it can be avoided because the UK customers make exempt sales and cannot claim input tax. Is business-splitting a possible solution? Or could some of the German supplier’s commission be invoiced directly from Germany to the final US-based client...