Referral and commission work: what an agency actually agrees to when it hands over a client
Introduce the client and take a commission: the model nobody writes down. What it is in tax terms, what you owe the client, and what to agree first.
There is a version of partner work that requires almost nothing from you. You know a company that needs a website built or rescued. You do not build websites. You make an introduction, somebody else quotes it, delivers it and supports it, and you receive a percentage of what they bill.
This is the shape most PR agencies, advertising agencies, consultants and investment groups actually want, because their clients keep needing production work and none of them want to run a build. It is also the arrangement written down least often, usually because it feels too simple to need writing down. Then the invoice goes out, and the questions arrive in a bad order.
The short version
A referral commission is a paid service, not a favour, and it lands in three places. In tax, it is a business to business supply: Article 44 of the EU VAT Directive puts the place of supply where the customer is established, and Article 196 shifts liability for the VAT to the recipient when the supplier is not established there, which for a cross-border introduction means you invoice without your local VAT and the partner accounts for it. In data protection, you are disclosing personal data to a separate controller, and GDPR Article 14 gives that controller one month at the outside, or the moment of first contact if sooner, to tell the person where their details came from. And commercially, the rate, the trigger, the duration and the client relationship all have to be agreed before the introduction, because an introduction is not reversible. Everything below is those three, in order.
What you are actually selling
The instinct is to treat a referral as goodwill with a tip attached. It is not. You are selling the one thing a production partner cannot manufacture: a company that already trusts you enough to take your recommendation.
That has a consequence worth being blunt about. Because trust is the asset, a bad referral costs you more than the commission is worth. If the partner is slow, or invisible, or quietly out of their depth, the client does not conclude that they picked badly. They conclude that you recommended badly, and the next thing you recommend gets a longer pause. So the diligence you skip on the project you still owe on the partner, which is a smaller job and a different one: how they communicate when something slips, whether they take over work somebody else abandoned without theatre, and what happens after launch.
The three-way split we use is on our for agencies page and the boundaries are worth stating here because people mix them up. White-label production means the work carries your brand and the client never meets the partner, so every delivery question is yours to answer. Embedded means the partner joins your calls as your team. Referral means you leave the chain: the partner quotes, contracts, delivers and supports directly, and your involvement ends at the introduction. Picking between them is not about margin. It is about whether you are prepared to answer for the delivery. If the honest answer is no, referral is the model, and putting your brand on it instead would be the expensive mistake.
The tax part, which is simpler than it looks
An introduction you are paid for is a supply of services. That puts it inside the VAT system, and for anything crossing a border the question is which country’s VAT.
The consolidated VAT Directive, read on the live EUR-Lex text on 10 August 2026, answers it in Article 44: “The place of supply of services to a taxable person acting as such shall be the place where that person has established his business.” The commission is supplied to the partner, so the supply lands where the partner is, not where you are.
Article 196 then says who pays it: “VAT shall be payable by any taxable person, or non-taxable legal person identified for VAT purposes, to whom the services referred to in Article 44 are supplied, if the services are supplied by a taxable person not established within the territory of the Member State.”
In plain terms, for a referring agency in one EU country invoicing a partner in another: you issue the invoice without charging your own local VAT, and the partner accounts for the tax at home under the reverse charge. Both sides need valid VAT numbers, both sides report the transaction, and neither side is out of pocket. Inside a single country the ordinary domestic rules apply instead and you simply charge VAT as usual. Outside the EU the analysis is a different one and this is the point to ask your accountant rather than a blog, but the underlying idea travels: the commission is revenue for a service, it gets an invoice, and it is not a discount on someone else’s bill.
Which brings up the one structural choice that changes the tax and the paperwork completely. Some partners prefer that the referring agency invoices the client for the whole project and pays the partner as a subcontractor. That is not a referral. That is white-label production with a light touch, the whole contract value sits in your books, the credit risk is yours, and the client’s questions come to you. It is a legitimate arrangement and sometimes the better one, but choose it deliberately.
The part almost everybody gets wrong: the client’s data
When you send a partner a name, an email address and a phone number, you have disclosed personal data to an organisation that decides for itself what to do with it. That makes them a controller in their own right, and it triggers an obligation on their side that most referral conversations never mention.
Article 14 of the GDPR, read on the live EUR-Lex text on 10 August 2026, covers exactly this case: personal data that “have not been obtained from the data subject”. Where that happens, the controller “shall provide the data subject with the following information”, and the Regulation sets the deadline in Article 14(3): “within a reasonable period after obtaining the personal data, but at the latest within one month”, or, if the data are to be used to communicate with the person, “at the latest at the time of the first communication to that data subject”.
In a referral, the first communication is the whole point, and it usually happens the same day. So the deadline is effectively immediate, and the compliant version costs nothing: the partner’s first email to the client says who passed the details on and why. That sentence is also good manners and good sales, which is a rare alignment. A partner who cannot tell you whether they do this has not thought about the referral model as carefully as you are about to.
Two smaller things fall out of the same analysis. Tell the client you are making the introduction before you make it, which is not a legal requirement in most referral shapes but removes any chance of the partner’s first email being the client’s first news. And send the minimum: a name, a role, a contact address and one line of context is a referral. Forwarding their whole file is a data transfer nobody agreed to.
The five things to agree before the introduction
An introduction cannot be taken back. Once the partner and the client are talking, your negotiating position is whatever you wrote down beforehand, so these are cheap now and impossible later.
The rate and what it applies to. A percentage of the first project’s value and a percentage of everything that client ever spends are wildly different deals. Both are reasonable. Pick one, in writing, and say whether the base is the invoiced amount before or after tax and expenses.
The trigger. Commission on signature, on first payment, or in step with the client’s payments? In step with payments is the version that survives a client who pays slowly, because it stops the partner funding your commission out of money it has not received.
The duration. If the arrangement covers ongoing revenue, say for how long. Open-ended commission on a maintenance retainer is an annuity somebody will eventually resent. A defined window, or a rate that steps down, tends to hold up better than one that runs forever.
What happens to the relationship. This is the real risk and it deserves a sentence rather than a clause borrowed from a template. Our position, and it applies to a referral exactly as it does under an NDA, is that a client we were introduced to is not a client we go hunting adjacent work with behind the introducer’s back. Yours might be stricter or looser. Write it down either way.
Who says what to the client. Whether the client is told there is a commission at all is a judgement call, and it is one you should make on purpose. In some professional relationships, particularly advisory ones, disclosure is expected or required, and the safe default is to assume the client will find out eventually and to be comfortable with how that reads.
When the referral model is the wrong answer
Two cases, and both are common enough to name.
If the client’s work is something you sell, referring it is giving away revenue you could have earned with a partner delivering under your brand. The reason to hand it over anyway is capacity or specialism, not convenience.
And if the client needs you to stay involved, meaning they will keep calling you when something breaks regardless of who built it, then a referral does not actually remove the work from your desk. It removes the revenue and keeps the calls. That is the worst of the three models, and the fix is either an embedded arrangement or white-label delivery where the support path is defined and paid for.
What this looks like with us
Introductions come in from PR and advertising agencies, consultants and investment groups whose clients need a site built or rescued and who have no interest in running a build. We quote the client directly, contract with them directly, and support them directly. The rate is agreed in writing per relationship before anything starts. The no-poaching commitment applies whether or not there is an NDA. And the first email we send a referred client says who sent us.
If that is the shape you want, tell us what the client needs and we will tell you honestly whether it is work we should be doing.