Procurement Fee Models: Three Choices, One VAT Question for UK Trade
By Faura ·
Trade procurement typically runs on three fee structures: disclosed commission, a flat procurement fee, or a hybrid of the two. Whichever model a supplier or showroom proposes, the immediate step is the same: get the terms in writing and confirm whether the party is acting as agent or principal, because that distinction changes VAT treatment, invoicing and who carries liability for the goods.
TL;DR:
- A 2019 BIID survey found 51% of designers combined charging methods; hybrid fees suit complex projects with changing specifications, imports, or heavy delivery coordination.
- Principal purchases add goods value to taxable turnover; agency costs qualify as disbursements only when authorized, used by clients, passed through at cost, and itemized.
- SBID cites around 15% as a commercial administration fee benchmark, but the arrangement must not leave clients worse off than buying directly.
- For bespoke orders, longer lead times and cancellation risk often favor a hybrid fee; compare supplier geography, delivery workload, and expected specification changes before quoting.
- Whichever billing format you choose, list procurement fees and disbursements separately, retain supplier and delivery records, and document purchase authority before ordering.
Table of Contents
- 1. Common procurement fee models explained
- 2. How to choose the right fee model for a project
- 3. VAT, agent versus principal, and disbursements
- 4. Billing, invoicing and logistics in practice
- 5. A trade showroom’s view on procurement transparency
- If you want consolidated procurement and showroom support
- FAQ
- Sources
1. Common procurement fee models explained
Most procurement arrangements fall into one of three patterns, and recognising which one sits in front of you makes every later conversation with a client or supplier easier.
Disclosed commission is the most familiar model. A trade price is agreed with the supplier, a percentage is added on top, and the client sees both figures, or at least knows a margin exists. It works well when product selection changes frequently, since the fee scales naturally with order value rather than needing to be renegotiated each time.
A flat procurement fee charges a fixed sum for sourcing, ordering and coordinating delivery, regardless of the value of goods purchased. Clients often prefer this because it is predictable: the fee does not move if specification changes mid-project, which makes it easier to budget against.
Hybrid models combine the two, typically a lower commission percentage alongside a separate administration or logistics fee that covers the practical work of consolidating orders, tracking deliveries and managing returns. This structure has become common precisely because procurement work has two distinct cost drivers: the value of goods handled and the administrative effort involved.
- Disclosed commission scales with order value and is easy to explain to clients.
- Flat fees give budget certainty regardless of specification changes.
- Hybrid fees separate margin from the administrative cost of running the order.
A 2019 BIID survey found that 51% of interior designers used a combination of charging methods rather than a single model, which reflects how often procurement is treated as its own workstream rather than folded into a design fee. SBID guidance also points to a commonly referenced benchmark for administration or procurement fees in commercial contexts, with a clear caveat that the arrangement must not leave the client worse off than buying direct.
2. How to choose the right fee model for a project
The right model depends less on personal preference and more on the shape of the project in front of you. A practical checklist helps you decide what to propose or accept before a single order is placed.
- Assess project size and complexity: larger, multi-room projects with frequent specification changes often suit hybrid or commission models better than a flat fee.
- Consider supplier geography and import risk: overseas or bespoke orders carry more handling and customs exposure, which usually justifies a logistics component.
- Gauge client preference: some clients value the predictability of a flat fee even if it costs slightly more overall.
- Check whether bespoke or made-to-order items are involved, since these carry longer lead times and higher cancellation risk that should be reflected in the fee structure.
- Estimate the logistics and time burden: consolidating multiple deliveries, snagging and returns all add administrative cost.
- Confirm your own VAT status and how procurement income interacts with it before agreeing a model.
Before signing off on an arrangement, ask the procurement partner who is legally purchasing the goods, how disbursements will appear on the invoice, whether delivery and returns are included, and what documentation the client will receive. BIID’s guidance on commissions and transparency is explicit that fee structures and terms should be defined and agreed in writing, not left implicit in a verbal quote.
Pro Tip: Ask for a written Letter of Appointment or terms sheet that names the fee model, the party purchasing goods, and how disbursements are itemised, before any order is placed.
3. VAT, agent versus principal, and disbursements
Whether you act as an agent or a principal in a procurement transaction changes the VAT position, the invoicing, and who is exposed if something goes wrong with a supplier, as detailed in the Fee Schedule examples from yacht project management.
Acting as principal means you buy the goods yourself and resell them to the client, which brings the full value of those goods into your taxable turnover. Gov sets out when a business must register for VAT, and procurement activity run through your own business can push turnover over that threshold faster than design fees alone would.
Procurement income counted as principal sales can bring a design practice over the VAT registration threshold sooner than expected, which is why many practices structure procurement as disclosed agency instead.
Acting as agent means the client is the buyer of record and you are simply arranging the purchase on their behalf, which keeps the value of the goods out of your own VAT calculation, provided specific conditions are met.
- The cost must be passed on exactly as invoiced, with no mark-up, to count as a disbursement.
- The client must have received and used the goods or services themselves.
- You must have authority to incur the cost on the client’s behalf, and this should be documented.
- The item must be itemised separately on the invoice, clearly shown as a disbursement rather than part of your own supply.
HMRC’s guidance on disbursements sets out these conditions in detail, along with worked invoice examples showing how a disbursement should be separated from a VATable supply. Getting this wrong does not just create an accounting headache: it can mean VAT is charged incorrectly on the wrong value, or that a disbursement is disallowed entirely.
Post-Brexit imports add another layer. Bringing goods in from the EU or further afield can involve import VAT and customs formalities that need to be priced into the procurement fee and quoted clearly rather than absorbed quietly. Where this applies, confirming the detail with an accountant or customs adviser before quoting is the safer route.
4. Billing, invoicing and logistics in practice
What a procurement fee looks like on an invoice matters as much as how it is calculated. Two formats dominate trade practice.
A consolidated single invoice, one order and one invoice for the whole procurement run, gives clients a single clear figure and makes cashflow easier to manage on both sides. Pass-through supplier invoices, where the client sees and pays each supplier separately, offer more transparency on individual costs but create more paperwork and more points where a mistake can creep in.
Whichever format is used, procurement fees and any disbursements should appear as separate line items, never blended into a single lump sum, so the client can see exactly what they are paying for and why.
- Keep client funds held for procurement separate from your own operating funds when acting as agent.
- Retain supplier invoices and delivery documentation for every order, not just the summary invoice sent to the client.
- Record written authorisation to purchase on the client’s behalf before placing any order.
These habits protect both the client relationship and your own bookkeeping if a dispute or VAT query arises later.
5. A trade showroom’s view on procurement transparency
From a showroom’s vantage point, procurement transparency starts before an order is ever placed. Working across multiple floors of finished interiors and a materials library, we support designers in presenting schemes directly to clients, which gives everyone sight of the same specification before costs are discussed.
Our approach is to consolidate procurement into one order and one invoice, reducing the number of moving parts a designer has to track across suppliers, deliveries and paperwork. Trade terms are agreed individually with each approved trade account rather than published, and written terms and invoice breakdowns are available to approved accounts on request, in keeping with the documentation practice this article recommends throughout.
— Faura Editorial
If you want consolidated procurement and showroom support
If the checklist above has you thinking about how much easier procurement becomes with one point of contact, that is exactly what our trade account is built for. Approved trade accounts get access to specify and source from over 200 brands across showroom floors, present schemes to clients through client hosting, and run procurement through a single consolidated order and invoice rather than a stack of supplier paperwork.
- Trade account access with specify and source support across our brand library.
- Consolidated procurement: one order, one invoice, across multiple suppliers.
- Client hosting for presenting schemes in person.
- A materials library and technical files to support specification decisions.
Trade terms are agreed individually with each approved account. Visit Faura to request an appointment and trade account details.
FAQ
What is the typical benchmark for procurement or admin fees?
SBID guidance cites around 15% as a commonly referenced benchmark for administration or procurement fees in commercial contexts, though the exact figure varies by project and should always be confirmed in writing. The guidance also stresses that any arrangement must not leave the client worse off than if they had bought the goods directly.
Do I need to register for VAT on procurement income?
It depends on whether you act as principal or agent and on your total taxable turnover. GOV.UK’s VAT registration guidance explains the threshold and when registration becomes compulsory, and an accountant can confirm how procurement income specifically affects your position.
What makes a payment count as a disbursement for VAT purposes?
A cost only qualifies as a disbursement when it is passed on exactly as invoiced, the client has authorised and used the goods or services, and it is shown as a separate, itemised line on the invoice. HMRC’s disbursement guidance sets out all the conditions, which must be met together, not selectively.
How does Faura structure procurement for trade clients?
We consolidate procurement into one order and one invoice for approved trade accounts, with written terms and invoice breakdowns available on request. Fees and trade terms are agreed individually with each account rather than published.
Should I use a flat fee or commission for a bespoke project?
Bespoke or made-to-order items tend to involve longer lead times and higher cancellation risk, which often makes a hybrid model, combining a lower commission with a separate logistics fee, more appropriate than a pure flat fee. The right choice still depends on project size, supplier geography and how much specification change is expected.