Now Epay has been in touch to assure us that the commission rates quoted by the company are all exclusive of VAT. "In other words," writes Peter Clark, director of finance, "the VAT is added to the invoiced commission amount. This means that when you sell £100-worth of Orange top-ups at the current commission rate of 4%, you earn £4 + VAT, which becomes £4.70."
Epay would then collect £95.30 from Subhash via direct debit. He must then treat the £4 as his sales and pay the 70p to HM Customs & Excise (which I believe is what the tax man told Subhash during a routine inspection, although the tax man wasn't sure of his ground). The top-ups themselves are treated as non-VAT-able as the mobile network pays the VAT on the consumption of the airtime by the customer.