Hi All
First post so apologies if this has been covered before....
I have recently gone self employed after a year of using an umbrella company. As part of my contract I receive a daily rate plus my expenses are covered (I stay away most weeks). The issue I have is that I do not know how to treat the expenses when it comes to VAT.
When submitting my expenses I have the option of claiming them (1). 'VAT registered - VAT removed' or (2). 'VAT registered - No VAT to remove'. I have been told by my agency that I need to key a combination of these, i.e. if I get a taxi receipt for £6 I would key option 2 as I do not have a VAT receipt and key it as gross. If I had say a hotel bill for £120 I would key option 1 and key the amount as net £100.
The problem I am having is I do not know if this is correct. If I enter my expenses as per above, £106 the agency would then pay me this plus 20% VAT £127.20. My accountant is then paying HMRC VAT of 14% ( I am on the flat rate) so on the above example I pay £15.62. Based on this I originally paid out £120 in expenses I am only getting back £111.58 so I feel I am out of pocket by £8.42.
My accountant has advised that I should key everything as net so the agency then pay me the exact amount I paid out originally, he also confirmed that I would still have to pay the 14% to HMRC and take the hit on this although overall I am better off by being on the flat rate?
I guess I have a number of questions:
1). Should the agency be paying me VAT on top of the the expenses claimed
2). Should I be paying HMRC VAT on these expenses rebates
Apologies for the long winded query and I hope it makes sense....any advice would be good!
First post so apologies if this has been covered before....
I have recently gone self employed after a year of using an umbrella company. As part of my contract I receive a daily rate plus my expenses are covered (I stay away most weeks). The issue I have is that I do not know how to treat the expenses when it comes to VAT.
When submitting my expenses I have the option of claiming them (1). 'VAT registered - VAT removed' or (2). 'VAT registered - No VAT to remove'. I have been told by my agency that I need to key a combination of these, i.e. if I get a taxi receipt for £6 I would key option 2 as I do not have a VAT receipt and key it as gross. If I had say a hotel bill for £120 I would key option 1 and key the amount as net £100.
The problem I am having is I do not know if this is correct. If I enter my expenses as per above, £106 the agency would then pay me this plus 20% VAT £127.20. My accountant is then paying HMRC VAT of 14% ( I am on the flat rate) so on the above example I pay £15.62. Based on this I originally paid out £120 in expenses I am only getting back £111.58 so I feel I am out of pocket by £8.42.
My accountant has advised that I should key everything as net so the agency then pay me the exact amount I paid out originally, he also confirmed that I would still have to pay the 14% to HMRC and take the hit on this although overall I am better off by being on the flat rate?
I guess I have a number of questions:
1). Should the agency be paying me VAT on top of the the expenses claimed
2). Should I be paying HMRC VAT on these expenses rebates
Apologies for the long winded query and I hope it makes sense....any advice would be good!
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