Making Margin from Contractor Work

A hidden markup is the most common way letting agents earn from contractor work. With a non-VAT-registered contractor, it can also lose money: a £10 margin on a £110 recharge becomes an £8.33 loss once VAT is due.

This guide sets out three ways to earn from contractor relationships without that problem:

- The arrangement fee: a separate, visible fee on the landlord's statement, with the contractor's cost passed through at cost
- The referral invoice: a monthly commission invoiced to the contractor, kept fully separate from the payment run
- The maintenance plan: a fixed monthly fee per property, with margin from agreed contractor rates rather than markups

Each comes with how it works, the VAT position and the practical trade-offs. There's also a comparison table and a checklist for choosing between them.

It's a companion to our VAT Guidance Note and Technical Analysis, which cover the compliance framework in full. It's guidance, not tax advice. Take your own advice before changing how you charge.