Expenses - invoicing clientco VAT

[techno]

Hi

Just getting myself confused as its a long time since I've needed to do this.

I recently travelled to USA as part of my contract. This was not expected but I got an agreement upfront about day rate, expenses incurred etc. but I'm now trying to put the invoice together for the expenses side.

Two examples:

1. Rail travel within UK (cost 120 GBP)
2. Hotel in USA (cost 800 USD and my credit card showing 520 GBP)

So I have paid for both on own credit card and entered an expense claim to myco (I am claiming £120 + £520).

Myco is VAT registered (not FRS) so how do I account for the VAT in the invoice to clientco...

1. Rail travel is £120+VAT (sounds like doubling of VAT) or is it £100+VAT
2. Hotel is £520 (USA therefore no VAT) or is it £520+VAT


Thanks in advance.

[sal]

IT all depends on your arrangements with the ClientCo.

Option A: YourCo invoices the ClientCo for the actual cost incurred by YourCo employee (you) of £120+£520=£640+VAT=£768
Option B: YourCo invoices the ClientCo for the face value of the receipts - so £533.33+VAT=£640

You loose a bit with option B but it's the cost of doing business.

[northernladuk]

I would be interested to hear what your accountant suggested you do...

[TheCyclingProgrammer]

You charge VAT on your expenses (except disbursements which these are not) no matter whether they originally had VAT or not. Aren't train fares zero rated for VAT? In which case the net cost to you is £120.

It's not VAT on VAT in any case as you aren't charging them for a train ticket and travel, you're billing them for your service which happens to include the costs you incurred, as agreed.

In your case, it's almost certainly option A.

If you had incurred VAT on your expenses, it's between you and your client whether you rebill the expenses net or gross of VAT. As you get to reclaim the VAT on your side, you could rebill net of VAT (so your VAT inclusive charge is the same as what you paid in total) and you won't lose any money; the whole supply is VAT neutral.

This question usually comes up as most of us are on the FRS so can't reclaim the input VAT and so would prefer to rebill at gross cost, with our own VAT on top. This is perfectly fine but sometimes clients and agents object to this.

[TheFaQQer]

I would be interested to hear what your accountant suggested you do...

Why would his accountant be privy to the details of the contract between the limited company and agency (or limited company and client)?

Mine isn't, so wouldn't be able to tell me what I could invoice the client.

[TheFaQQer]

IT all depends on your arrangements with the ClientCo.

Option A: YourCo invoices the ClientCo for the actual cost incurred by YourCo employee (you) of £120+£520=£640+VAT=£768
Option B: YourCo invoices the ClientCo for the face value of the receipts - so £533.33+VAT=£640

You loose a bit with option B but it's the cost of doing business.

lose

Should be A if you can do it, may well end up as B if the client / agency don't understand.

[jjdarg]

IANA,
But I'm pretty sure it is option A. I looked it up on HMRC's site, and my accountant berated me because I didn't charge VAT on top of expenses on a couple of invoices. And in fact, even though the VAT was not collected, it was still owed to HMRC (according to the page I found on HMRC through googling).

[Craig at Nixon Williams]

The answer is option A, TCP has hit the nail on the head as to why:

It's not VAT on VAT in any case as you aren't charging them for a train ticket and travel, you're billing them for your service which happens to include the costs you incurred, as agreed.

It shouldn't have anything to do with what is in the contract, it's based on VAT legislation. You can't have a contract agreeing not to charge VAT when VAT legislation clearly says the opposite.

[techno]

Thanks for all the replies...

The answer is option A, TCP has hit the nail on the head as to why:

Quote Originally Posted by TheCyclingProgrammer View Post
It's not VAT on VAT in any case as you aren't charging them for a train ticket and travel, you're billing them for your service which happens to include the costs you incurred, as agreed.
It shouldn't have anything to do with what is in the contract, it's based on VAT legislation. You can't have a contract agreeing not to charge VAT when VAT legislation clearly says the opposite.

Cheers Craig & TCP...option A it is.

[TheCyclingProgrammer]

Thanks for all the replies...

Cheers Craig & TCP...option A it is.

Just remember in your specific example it's simple as neither of your expenses originally incurred VAT.

The only legal requirement is that you add VAT, there is no rule about WHAT you add it too. As mentioned it's generally a contractual issue. It could, for instance, be a flat daily amount rather than exact costs. But you would still add VAT to this.