VAT on expenses charged to Agent

[ctdctd]

Morning all,

Contracting with my own Ltd via agent to client. I do occasional days on different sites and the agent has agreed a contribution towards travel expenses.

So per day I've invoiced - 1 x Professional Day and 1 x Travel Expenses - all +VAT.

I've been paid but they have deducted the VAT amount from the Travel Expenses. From a quick Google, I think my invoicing is correct - any experts on here agree (or disagree) with me?

How would you go about explaining this (nicely) to the agent?

Thanks

[malvolio]

Morning all,

Contracting with my own Ltd via agent to client. I do occasional days on different sites and the agent has agreed a contribution towards travel expenses.

So per day I've invoiced - 1 x Professional Day and 1 x Travel Expenses - all +VAT.

I've been paid but they have deducted the VAT amount from the Travel Expenses. From a quick Google, I think my invoicing is correct - any experts on here agree (or disagree) with me?

How would you go about explaining this (nicely) to the agent?

Thanks

How about "You're commiting VAT fraud"??

Since you are VAT registered you are required to charge VAT on all invoices to your clients (in this case, the agency). The VAT you have already paid in your expenses is part of your cost of sales, so it is entirely legitimate that you add VAT to it - the underlying logic is that you have "added value" by performing the service itself, hence the tax is due. It is a myth that you are charging VAT on VAT, that doesn't actually matter at all. Nor is it a cost you your agency, since they will recover any VAT they pay out from their own clients.

By removing the VAT element the agency is effectively reducing their own tax bill at your expense. Hence, fraudulent behaviour.

This is all spelt out on the HMRC website (somewhere!!) and in Tolleys and in accepted practice. However, looking at the end-to-end transaction chain the nett VAT actually paid to HMRC works out the same, so they don't really care either way, it's only ou that is losing money. You should speak to your own accountant for the official argument.

[Flat Eric]

I've recently returned from a trip to NY where I ( my ltd) financed the trip and claimed it all back on expenses. I charged VAT on these expenses and the agency didn't query it and has paid up in full.

[ctdctd]

How about "You're commiting VAT fraud"??

Since you are VAT registered you are required to charge VAT on all invoices to your clients (in this case, the agency).

Thank you Malvolio - I'll save the comment about fraud up for later in case I need it

I'll have a dig around the VAT site to see if I can find something to quote - may even phone them up as I've found them helpful before.
(Very small text so no-one notices - haven't got an accountant (yet))

[Sockpuppet]

Just send them another invoice with the amount outstanding in large red letters.

Make sure PAYMENT Due in X days is on the invoice.

If they query it or refuse to pay take them to court. Simple as.

[ctdctd]

Just send them another invoice with the amount outstanding in large red letters.

Make sure PAYMENT Due in X days is on the invoice.

If they query it or refuse to pay take them to court. Simple as.

I'll try speaking to them first - they normally pay within a week and I enjoy the extra work they are providing. So far, its only about £100 and I'm sure they will see reason!

[TheFaQQer]

As already said, you're right, they're wrong, they need to pay up.

Ask nicely, and get them to explain in writing why they haven't paid in full. Then explain it to them again, reinvoice, and only if they refuse at that stage get heavy with them.

[hugebrain]

It is a myth that you are charging VAT on VAT, that doesn't actually matter at all. Nor is it a cost you your agency, since they will recover any VAT they pay out from their own clients.

Of course it's not a myth. I don't know how people can be so clueless about VAT. If you write a check to the Government every three months then it's costing you money.

The people who say it "doesn't actually matter at all" must think it's paid by by the Easter bunny.

[malvolio]

Of course it's not a myth. I don't know how people can be so clueless about VAT. If you write a check to the Government every three months then it's costing you money.

The people who say it "doesn't actually matter at all" must think it's paid by by the Easter bunny.

It's not a myth at all. The money you are sending HMRC is merely money you've collected from your clients. It is never any part of your turnover and forms no part of your own assets at any time. You are only allowed to retain any interest you may earn on it between collection and payment as a consideration for the work entailed.

Go read the original (1972) announcement of the core principles of VAT which I learned back when I was an accountant running a purchase ledger for a £30m pa company - they have never changed. It's not me that's clueless.

[WindyAnna]

If you write a check to the Government every three months then it's costing you money.

It isn't costing you money - it was never your money in the first place!