VAT Charging

[PaulD40]

I was contracting via an umbrella company. During this contract I had billable expenses in the form of hotel and food receipts and was charged VAT at POS for these. When the consultancy I was working via paid my invoice to the Umbrella company, the umbrella company deducted the VAT element of these expenses from my invoice payment - as the consultancy I was working for wasn't VAT registered. So in essence I paid the VAT to the hotels etc and then my umbrella company, who is VAT registered, took it from me as they have to pay VAT..... is this allowed?

Thanks

[ladymuck]

Expenses should be charged gross. Just because the person paying you isn't VAT registered, that doesn't mean they shouldn't pay it.

[lucyclarityumbrella]

I was contracting via an umbrella company. During this contract I had billable expenses in the form of hotel and food receipts and was charged VAT at POS for these. When the consultancy I was working via paid my invoice to the Umbrella company, the umbrella company deducted the VAT element of these expenses from my invoice payment - as the consultancy I was working for wasn't VAT registered. So in essence I paid the VAT to the hotels etc and then my umbrella company, who is VAT registered, took it from me as they have to pay VAT..... is this allowed?

As long as you have a VAT receipt then you should be paid back in total including VAT, however my guess is that the consultancy simply didn't pay the VAT and the umbrella is doing the same.

[PaulD40]

Thanks for the replies. Just to clarify.

I presented the receipts which included the VAT element to the consultancy. The consultancy paid the full amount to the umbrella company.

I think the umbrella company, when invoicing the consultancy added VAT to the total bill to the consultancy. The consultancy didn't pay that VAT so the umbrella company took the VAT from my receipts to cover the total bill VAT they were expecting.... if that makes sense....

Example...

I book a Travelodge for 2 days: Total bill 400 + 80 (VAT) - I pay 480 to travelodge
I submit my timesheet plus these expenses to both the umbrella company and consultancy
lets say this totals 5000 time + 480 expenses
Umbrella company invoices the consultancy 5480 + invoice VAT
Consultancy pays 5480 but not the invoice VAT
Umbrella company deducts the 80 VAT I paid and pays me 5400 (obv minus tax NI etc etc)

Needless to say, I am out of pocket....

[Amanensia]

Why are the consultancy not paying VAT?

[lucyclarityumbrella]

Example...

I book a Travelodge for 2 days: Total bill 400 + 80 (VAT) - I pay 480 to travelodge
I submit my timesheet plus these expenses to both the umbrella company and consultancy
lets say this totals 5000 time + 480 expenses
Umbrella company invoices the consultancy 5480 + invoice VAT
Consultancy pays 5480 but not the invoice VAT
Umbrella company deducts the 80 VAT I paid and pays me 5400 (obv minus tax NI etc etc)

Needless to say, I am out of pocket....

OK so they are adding VAT to the invoice, that's fine, that is input VAT on the total value, but you should not be out of pocket.

From a moral perspective the invoice with the umbrella should remain underpaid by that VAT amount, they should be the ones chasing that - they have effectively received the funds to repay you in full. If they then umbrella have the VAT receipts in theory they can then claim the VAT back on their return, it just means they have to wait in terms of cashflow. Please note I am assuming from what you say is that the consultancy hasn't paid the input VAT on the expense part of the invoice, rather than just not paying the VAT in it's entirety.

[PaulD40]

Well I guess what you would hope is that the consultancy add VAt to their bill to the end client and its all a long chain of happinesss….


They just tell me (as of today) that they need to pay
their VAT. They haven't explained why that payment needs to come from me...

[DeludedKitten]

Expenses should be charged gross. Just because the person paying you isn't VAT registered, that doesn't mean they shouldn't pay it.

Expenses should be charged in line with your employer's expenses policy.