UK Interior Designer Markup: Why VAT Can Apply to the Full Order
By Faura ·
Most UK interior designers mark up the goods they procure, either as a cost-plus percentage on invoice or as a separate procurement fee, and this choice changes how VAT applies to the whole order. Once a designer adds any margin, HMRC generally treats them as the principal in the sale, so the full charge counts towards taxable turnover. Before accepting a quote, ask whether goods are being passed on as a disbursement or resold with a markup, and whether the figures quoted include VAT.
TL;DR:
- A disbursement requires exact cost, client authorization, and an appropriately named supplier invoice; adding any margin disqualifies the payment from that treatment.
- Resold goods count at full sale value toward taxable turnover, so furnishings can bring studios to the £90,000 VAT registration threshold faster than design fees alone.
- UK trade discounts commonly range from 10% to 40%; SBID recommends a separate procurement administration fee of around 15% for commercial projects.
- Compare quotes by separating goods costs, service fees, VAT, and discount treatment, then confirm ownership, invoice names, and change order terms before signing.
- Keep written client approval for each purchase and itemize goods, fees, and VAT on separate invoice lines to support accurate records.
Table of Contents
- Fee models designers use for furnishings and procurement
- Markup versus procurement fee: the VAT and accounting difference
- Trade discounts and typical markup figures in the UK market
- Reading and comparing two quotes: a trade checklist
- VAT records and invoicing practice that reduce risk
- How a trade showroom supports transparent procurement
- What most advice on markups gets wrong
- Procurement support for designers who want it handled cleanly
- FAQ
- Sources
Fee models designers use for furnishings and procurement
Interior designers in the UK rarely charge one way. A quote typically blends a creative fee with a separate charge for sourcing and handling goods, and knowing which model sits behind each line is the first step to reading it correctly.
The main structures seen across the trade are:
- Fixed fee: an agreed sum for defined design work, independent of how much is spent on furnishings.
- Hourly rate: time-based billing, often used for smaller projects or additional scope.
- Percentage fee: a charge calculated as a proportion of overall project or furnishings spend.
- Cost-plus (markup): goods are bought by the designer and resold to the client with a margin added.
- Procurement or administration fee: a separate, itemised charge for sourcing, ordering and coordinating goods, kept apart from the design fee itself.
BIID research on how designers charge found that firms commonly combine these models rather than relying on a single method. A hybrid approach, where the creative fee is fixed or hourly and procurement is billed separately, tends to suit trade workflows better than a single blended rate, because lead times, supplier terms and the effort of managing orders vary enormously between a joinery piece and an off-the-shelf lamp.
Markup versus procurement fee: the VAT and accounting difference
This distinction matters more than any other decision a studio makes about pricing, because it determines how HMRC treats the transaction.
When a designer buys goods and resells them with a margin, they are acting as principal. The transaction is a taxable supply in its own right, and the full sale value, not just the margin, counts towards taxable turnover. When a designer instead recharges the exact cost of goods bought on a client’s behalf, with no margin, and meets HMRC’s disbursement conditions, the payment can be excluded from VAT calculations as an agent. Those conditions are strict: the supplier invoice should name the client where appropriate, the client must have authorised the purchase, and no margin can be added, or the disbursement treatment fails.
The practical effect shows up fastest in VAT registration. A studio buying furnishings as principal includes the full value of every piece of furniture, fabric and fitting in its taxable turnover, not just its design fees. Accounting guidance on interior design fee structures sets out how this can push a studio past the £90,000 VAT registration threshold far sooner than a studio charging fees only, simply because the goods themselves are large-ticket items passing through the business’s books.
A few points worth checking on any quote:
- Whose name is on the supplier invoice, the designer’s or the client’s.
- Whether any margin has been added to the cost price.
- Whether the client gave explicit authorisation before the purchase was made.
Nearly £90,000 in taxable turnover can be reached quickly when goods are resold as principal rather than recharged as disbursements, because the VAT registration threshold counts the full sale value, not the margin alone.
Trade discounts and typical markup figures in the UK market
Trade discounts off retail commonly range from 10% to 40%, with many mainstream supplier programmes sitting around 20% to 30%. What a designer does with that discount, pass it to the client, keep it, or split it, is a commercial decision, but it should be stated plainly in the contract rather than left implicit in the final invoice.
SBID’s guidance on design fees recommends a procurement administration fee of around 15% for commercial projects, separate from the design fee itself, and cautions against using retained trade discounts as a substitute for charging properly for design work. The same guidance discourages “free” design funded only through hidden markups on goods.
- Passing the full trade discount to the client and charging a transparent procurement fee keeps the commercial relationship clean.
- Keeping some or all of the discount as part of the fee structure is legitimate when it is disclosed upfront.
- A procurement fee tends to suit commercial and larger residential projects better than a blended markup, because it separates professional service from goods cost and is easier to defend to a client or an accountant.
Reading and comparing two quotes: a trade checklist
Two quotes covering the same scheme can look wildly different depending on whether one uses a markup and the other a procurement fee. Running through the same checks on each puts them on equal footing.
- Check who legally owns the goods before delivery, the designer or the client.
- Confirm whose name appears on the supplier invoice and whether that matches the disbursement conditions.
- Establish whether the quoted figures are VAT inclusive or exclusive.
- Separate itemised disbursements from goods being resold with a margin.
- Ask how trade discounts are treated, passed on, retained or split.
- Clarify the change-order policy for mid-project substitutions or client-requested revisions.
Pro Tip: Ask each designer to restate their total as “goods cost plus fee” and “goods cost plus VAT” separately; it turns two incomparable quotes into the same two numbers.
Our purchase order checklist for interior designers sets out the paperwork that should sit behind each line on a quote, which is worth having to hand when comparing proposals.
VAT records and invoicing practice that reduce risk
Good documentation is what separates a defensible disbursement from a VAT dispute waiting to happen. HMRC’s guidance is specific about what needs to be in place, and the burden of proof sits with the studio, not the client.
- Keep supplier invoices in the client’s name where the disbursement route is being used.
- Retain written client authorisation for each purchase made on their behalf.
- Itemise invoices so goods, fees and any VAT are shown as distinct lines, never bundled into one figure.
- Stage payments against supplier lead times when buying as principal, since working capital is tied up until the client pays.
- Consider how returns, damage and storage are handled when the studio, rather than the client, holds title to goods in transit.
Guidance on invoice timing from TradeTally is a useful reference for understanding when a pro forma becomes a VAT invoice in practice, a distinction that matters once goods and fees start appearing on the same document. For studios approaching the registration threshold, AAT’s guidance on VAT registration timing sets out what to model before turnover tips over £90,000.
How a trade showroom supports transparent procurement
Our trade residency in Westminster exists partly to make this clearer in practice. Designers specify from over 200 brands on site, present schemes to clients in finished room settings, and have procurement, logistics and delivery handled as one order and one invoice, which keeps the paper trail behind a quote straightforward rather than scattered across multiple suppliers.
What most advice on markups gets wrong
Most guidance on this topic treats markup versus procurement fee as a pricing preference, something to pick based on what feels more profitable. That misses the point. It is first and foremost a VAT and bookkeeping decision, and the studios that run into trouble are usually the ones that chose a model for commercial reasons without checking whether their invoicing practice actually supported it.
The conventional advice to “just be transparent with clients” is necessary but not sufficient. Transparency with a client does not satisfy HMRC’s disbursement conditions, and a studio can be entirely upfront about its margin while still getting the VAT treatment wrong. What should come first is a plain answer to one question: are we buying this as principal or passing it through as agent? Everything else, the invoice format, the discount policy, the registration timing, follows from that answer.
Designers who prioritise getting this structural question right before they prioritise their fee percentage tend to have far fewer surprises at year end.
— Faura Editorial
Procurement support for designers who want it handled cleanly
A trade-only residency and showroom in Westminster, open by appointment, enables designers to specify from over 200 brands across two floors of finished interiors. A trade account gives approved designers access to the showroom, specification support and client hosting, so schemes can be presented to clients directly in the space rather than through scattered samples.
Where procurement is the sticking point, the FF&E procurement service consolidates sourcing, logistics and delivery into one order and one invoice, which simplifies the paper trail behind a quote considerably. Trade terms are agreed individually with each approved account.
To start, visit our page for interior designers and request an appointment, or apply for a trade account to begin specifying from the collection.
This article is general information, not a substitute for advice from a qualified financial advisor. Consult a qualified financial professional about your own circumstances before acting on anything here.
FAQ
How much does an interior designer make in the UK?
Earnings vary widely depending on fee model, project scale and whether the designer charges a markup on goods alongside design fees. BIID’s fees research shows firms commonly combine fixed, hourly and percentage charging rather than relying on one method, which makes income difficult to generalise across the trade.
What does commercial interior design include?
Commercial interior design covers spaces such as offices, hospitality and retail, and typically involves specification, procurement coordination and project oversight alongside the creative scheme. SBID’s guidance recommends a procurement administration fee of around 15% for this type of work, kept separate from the core design fee.
What is the 70/30 rule in interior design?
This is not a recognised industry standard referenced in UK trade guidance from bodies such as BIID or SBID, so we would caution against treating it as a fixed rule. Fee splits between design and procurement vary by project and should be agreed and documented individually.
How many interior designers are there in the UK?
We do not have a figure from a named, credible source for this, so none is stated here.
Do I need to register for VAT if I mark up furnishings?
If you act as principal when reselling goods, the full sale value counts towards your taxable turnover, which can bring you past the £90,000 registration threshold faster than fees alone. Checking your turnover position regularly, with an accountant where needed, avoids registering late.
Sources
- VAT: costs or disbursements passed to customers
- Interior Design Fees | Society of British & International Interior Design
- Interior design fee structure: four models, four margins — Alto Accounting
- 2019 interior designers fees research — BIID