VAT when invoicing expenses

[Limited]

I'm on the Flat Rate scheme and I've just spent £100 on train fare and £100 on hotel, both rechargaeble to the client.

I am told that I should add VAT to the train fare as this has been sold without VAT

So I'm charging the client £117.50 for the train fare and £100 for the hotel

And I'm paying VAT on both at 14.5 % (is that right?) of gross so does that mean that I've made a few percent on the train fare but lost much more on the hotel?

And what do I do if the expenses were incurred abroad (EC if that makes any difference) and the client is in the UK?

My head is hurting thinking about it so any help appreciated.

[oraclesmith]

If you are VAT registered you will need to invoice you clients for your services with VAT added. This includes any extra service charge you make for travelling or staying over at a client site.

There is effectively a disconnection between what you incur and what you charge to your client -like there is in any consultancy arrangement. You can charge them anything you like if it's catered for by your contract for services. They aren't disbursements.

I typically absorb my own expenses for certain regions and charge them on, plus VAT and an admin fee for others. If you incur abroad then the FRS makes it easier because you simply charge what you like and add VAT of 17.5% for your VATable services (ie. all of them!), assuming the client is in the UK. You could even have your own tariff for travelling to client sites and accomodation which forms part of your contract, which could bear no resemblance to what you actually incur.

In this example, I would charge the client at least £235. On FRS you pay the HMRC their percent and keep the rest.

The current rate for IT consultancy is 13% (12% in year one), so you should pay the HMRC £30.55 if at 13% or 28.20 at 12%.

In my opinion.

[Limited]

Thanks for your help

The contract just states that the client will reimburse any necessary travel expenses

I get quite a bit of work out of them so don't want it to look like I'm just bumping up expenses. Ideally I would like to invoice them as if was not on the FRS as they don't need to know this.

So, if I wasn't on FRS I would invoice £100 for hotel and £117.50 for train and take the hit on the hotel

Any idea what I would do with overseas expenses if I was not on FRS? Would I have been able to claim back VAT paid?
Also, is the 14% for your first year of trading or first year FRS registered?

thanks

[TheFaQQer]

The extra 1% is in first year of VAT registration.

Work out how much it cost your company. Invoice them for that, plus VAT. End of calculation - you're invoicing for them to reimburse your expenses, nothing more.