expense

[krssubbu]

Hi,

I am a contractor working out of my own limited company. I am working for this client xyz through agency abc. I travel around for this company (tube + bus) and the client is willing to reimburse me for this but when I get these paid the agency send me the payment with a description of "expenses"

so my question is, is it ok for me claim these travel expenses in terms of hmrc ? I am just worried because contractors cant claim for expenses from client for travel, isn't it ?

Thanks

[jmo21]

so my question is, is it ok for me claim these travel expenses in terms of hmrc ? I am just worried because contractors cant claim for expenses from client for travel, isn't it ?

Yes. er... no?

[badger7579]

Not sure what you are asking here ???

[krssubbu]

Not sure what you are asking here ???

can I claim for my travel expense if the client is willing to reimburse me ?

will it be a problem in terms of ir35 - hmrc view ?

[badger7579]

Yes its called disbursements. you add this to your invoice and add VAT.

Nothing to do with IR35

[kal]

can I claim for my travel expense if the client is willing to reimburse me ?

will it be a problem in terms of ir35 - hmrc view ?

You need to invoice for expenses in the same way you do for your billable hours (charging VAT as applicable), otherwise you are in the do-do, employees gets their exact expenses 'reimbursed' by their employers...

[TheCyclingProgrammer]

Yes its called disbursements. you add this to your invoice and add VAT.

I don't think the kind of expenses OP is describing could be treated as disbursements. They'd form part of your service and you would charge VAT normally (whereas a disbursement would be passed on to the client net of VAT).

HM Revenue & Customs: Costs passed on to clients - disbursements - and VAT

OP - you should be claiming your own out of pocket expenses from YourCo directly (employee expenses rules apply as normal) and YourCo should be re-billing these expenses to the agency (so you should be invoicing for them unless the agency is operating self-billing) and charging VAT accordingly.

[craig1]

Good luck with the expense + VAT thing, that's probably the hardest thing to get an agency to accept and usually requires going through the agent, agent's manager, agent's manager's manager and down the chain to their accounting assistant then to their accounting team leader, to their accounting manager and finally out to an accountant but only after stapling a copy of the HMRC manual to their forehead. Even then, you'll get persistent complaints from them about having to pay VAT on VAT.

A long-term, persistent PITA in my time as a contractor.

[TheCyclingProgrammer]

Good luck with the expense + VAT thing, that's probably the hardest thing to get an agency to accept and usually requires going through the agent, agent's manager, agent's manager's manager and down the chain to their accounting assistant then to their accounting team leader, to their accounting manager and finally out to an accountant but only after stapling a copy of the HMRC manual to their forehead. Even then, you'll get persistent complaints from them about having to pay VAT on VAT.

A long-term, persistent PITA in my time as a contractor.

Agencies do like to kick up a fuss about re-billing expenses at the gross cost including VAT and then charging VAT on top of this (which is perfectly acceptable but like you say, agencies don't get it). It's been discussed to death on here but there is no "right" way of doing this - whether or not you re-bill expenses at net or gross cost is a matter of policy and contractual agreements and something you'll need to thrash out with the agency (personally I wouldn't waste too much time over the issue - if you're on the standard VAT scheme the whole thing is VAT neutral and it's unlikely you'll make a loss if re-billing net + VAT even if you're on the FRS).

There should never be any dispute over you charging VAT on your expenses at all though - it's quite obvious you have to charge VAT on your expenses, regardless of the net cost (or if the original expense had no VAT).

[craig1]

Agencies do like to kick up a fuss about re-billing expenses at the gross cost including VAT and then charging VAT on top of this (which is perfectly acceptable but like you say, agencies don't get it). It's been discussed to death on here but there is no "right" way of doing this - whether or not you re-bill expenses at net or gross cost is a matter of policy and contractual agreements and something you'll need to thrash out with the agency (personally I wouldn't waste too much time over the issue - if you're on the standard VAT scheme the whole thing is VAT neutral and it's unlikely you'll make a loss if re-billing net + VAT even if you're on the FRS).

There should never be any dispute over you charging VAT on your expenses at all though - it's quite obvious you have to charge VAT on your expenses, regardless of the net cost (or if the original expense had no VAT).

The problem with the bit in bold is that if you get a VAT audit, they'll look at the invoices and wonder why you didn't charge VAT properly. That then will get them into suspicious mode "if he didn't want to do that properly, what else has he missed?"