How to treat expenses paid by client.

[ItRYmyBEst]

My client has paid my travel expenses which amount to A

how should I treat this from accounting perspective?

Should I claim A as an expense from hmrc and the A amount paid by the client as profit? Or do the two just cancel each other out?

[Kenny@MyAccountantFriend]

You should invoice for the expenses as you do your daily rate and apply VAT if applicable.

The actual expenses incurred should be included and will offset against the amount reimbursed by your client.

You wouldn't make a separate claim to hmrc.

[ItRYmyBEst]

It seems a bit weird to charge VAT on my expenses.. I'm on flat rate and that means I will gain money just by having expenses.

[northernladuk]

Nice explanation of what to do in the newbies guides...

IT contractor expenses: Charging expenses back to your client :: Contractor UK

[teapot418]

If you don't, you will lose money - the VAT element of the invoice will have to be paid.

Without adding VAT:

You incur £100 expenses.

YourCo invoices client for (total) £100

YourCo owes taxman £14.50 (depending on your flat rate)

YourCo is left with £85.50, but has to reimburse you £100.

[jamesbrown]

It seems a bit weird to charge VAT on my expenses.. I'm on flat rate and that means I will gain money just by having expenses.

Your expenses are sold (recharged) as a service to your client. In rare cases, costs need to be treated as disbursements (when you're making a purchase on behalf of the client, as opposed to providing a service to the client). Of course, whether your client will pay this or any other amount is a different matter, to be agreed with your client in advance (i.e. contractually), but you will add VAT to the amount that your client has agreed to pay. This is standard practice, and you should really know about it by now.

[ItRYmyBEst]

thanks guys

[ItRYmyBEst]

I take it I still need my receipts for hmrc in this case.

[fool]

I take it I still need my receipts for hmrc in this case.

Yeah.