Originally posted by lucycontractorumbrella
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Umbrella companies and VAT on billable expenses
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Originally posted by alext View PostThanks for the response but I'm also a little confused. In the last example, does that mean that the contractor is out of pocket and is there any rules to say that this should be the case? It seems wrong that a contractor is out of pocket because of essentially doing their jobComment
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Originally posted by Lance View Post
Sorry Lucy if I’m missing something.
So in your example;
OPTION 1 (Brolly must wait until end of the quarter to reclaim VAT and pays out to the contractor in advance of reclaiming, brolly claims the VAT from original receipt):
Employee claims £120 inc. VAT
Umbrella, as the employer CHARGES INVOICE AS £100 + VAT and is entitled to reclaim the £20 VAT from the initial claim - ONLY IF CONTRACTOR CAN PROVIDE THE ORIGINAL VAT RECEIPT DIRECT TO THE BROLLY (Some end clients request this, in which case the brolly cannot reclaim and are unlikely to pay the VAT to the contractor)
Umbrella invoices £100 + VAT to the agency (agency cannot reclaim any VAT)
Agency invoices £100 + VAT to the client (client cannot reclaim any VAT)
OPTION 2 (Contractor is paid in full and the chain reclaim the input tax on the invoices, end client reclaims the VAT from the original receipt)
Employee claims £120 inc. VAT
Umbrella, charges agency at £144.00 (£120+VAT) - INPUT TAX - AGENCY CAN CLAIM THE £24.00 VAT BACK FROM THE INVOICE
Agency invoices £172.80 (£144 + VAT) to the client - AGENCY AND END CLIENT CAN RECLAIM £32.80 VAT AMOUNT - PLEASE NOTE THE AGENCY MAY CHOOSE TO OPERATE AS ABOVE AND NOT ADD INPUT TAX AT THIS POINT. END CLIENT IS ALSO IN RECEIPT OF THE ORIGINAL RECEIPT AND CAN CLAIM THE ORIGINAL £20 BACK.
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Umbrella companies and VAT on billable expenses
Good god. So an Umbrella cannot operate VAT as VAT is mean to work. I’m glad I am LTD. When I was FRS I lost out like this, but it was offset by the FRS profit.
The message to the OP then is to use shabby B&Bs that aren’t VAT registered, or suck it up.
Thanks Lucy for taking the time to explain.See You Next TuesdayComment
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