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VAT on commission for online sales

I have a VAT query. I have a company which sells clothes online and is VAT registered in the UK. I was approached by another online store and they want to work with us by adding our products on their online website. They will not purchase the products from us but will just add the images on their website and when their customer buys a dress from their website the other company will retain a commission fee and will transfer the rest of the money to us on a weekly or monthly basis. Just to clarify that the other company has their own checkout on their website so the customer pays the total order amount to them. The other company is also VAT registered in the UK. I received a contract from the other company and they calculate the commission in the following way: If a customer buys one of our dresses from their website for £120, they deduct 20%VAT which they need to pay to HMRC and calculate their commission based on the purchase order less 20% VAT. Their commission fee is 25% so 25% of £100=£75. We will be paid £75 for this order and they will keep £25 commission fee. My question is: 1) is this the right way to calculate the commission and VAT or there is another way? 2) do I need to pay VAT on the £75 that I will receive from them provided that the other company has already deducted the VAT? 3) Do the other company need to pay VAT on the commission fee, i.e. £25?

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