Hi all,
I've just started as a contractor, through an Umbrella company, and I'm hitting a bit of an impasse about how VAT on expenses that I charge directly to my client is dealt with. Current position is that I am the one out of pocket, which doesn't seem right to me.
So in a very normal scenario such as a hotel booking:
I pay £100 + VAT for the hotel = £120
I submit that £120 expense to my employer (the Umbrella) shown as a Direct expense
They add further VAT onto the total of their invoice to my client, so that hotel now is at £144
Is that correct? I think maybe it is as they're invoicing for the 'service' (me being in the hotel) as opposed to the actual hotel booking.
But I don't know understand how the VAT side should be working.
My client says they are being charged double VAT on this
My client also states they pay the net of expenses, assuming (I guess) that my Umbrella claim back the VAT and pass it on to me along with the £100 they get from the Client.
That's not how it is working at the moment, so I am getting the £100 when the actual cost to me was £120.
My client isn't paying the VAT element because they feel the Umbrella should, and vice versa.
My client is also suggesting I find a new Umbrella if I want to keep working for them because this is hassle they don't need.
I don't need it either, but if all Umbrella's work the same way and this is correct as it is then moving won't help me.
Surely charging expenses directly over to the client and getting paid them back in full is quite normal, and the treatment of the VAT is what I pay the Umbrella company to worry about?
Any advice welcome.
Thanks
I've just started as a contractor, through an Umbrella company, and I'm hitting a bit of an impasse about how VAT on expenses that I charge directly to my client is dealt with. Current position is that I am the one out of pocket, which doesn't seem right to me.
So in a very normal scenario such as a hotel booking:
I pay £100 + VAT for the hotel = £120
I submit that £120 expense to my employer (the Umbrella) shown as a Direct expense
They add further VAT onto the total of their invoice to my client, so that hotel now is at £144
Is that correct? I think maybe it is as they're invoicing for the 'service' (me being in the hotel) as opposed to the actual hotel booking.
But I don't know understand how the VAT side should be working.
My client says they are being charged double VAT on this
My client also states they pay the net of expenses, assuming (I guess) that my Umbrella claim back the VAT and pass it on to me along with the £100 they get from the Client.
That's not how it is working at the moment, so I am getting the £100 when the actual cost to me was £120.
My client isn't paying the VAT element because they feel the Umbrella should, and vice versa.
My client is also suggesting I find a new Umbrella if I want to keep working for them because this is hassle they don't need.
I don't need it either, but if all Umbrella's work the same way and this is correct as it is then moving won't help me.
Surely charging expenses directly over to the client and getting paid them back in full is quite normal, and the treatment of the VAT is what I pay the Umbrella company to worry about?
Any advice welcome.
Thanks
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