VAT on espenses paid direct

[philp]

Is the client direct? If you invoice the UK agent who invoices the Swiss client then you should charge VAT.

Thanks - client is direct but it seems that costs incurred in the UK (i.e. travel) are still VATable - makes sense I guess.

[expat]

Ahem! You either invoice your client for something, or you get them to defray an expense.

In the latter case you simply tell them that you paid 11.75 for a taxi, and they pay that. Whether that is justified or not is a separate question.

In the former case, you paid 10.00 + VAT for goods or services used in the project (taxi ride); and you bill the client 10.00 + VAT.

Net result to you is zero in either case.

Note that the second case is just as if the client had paid it and you hadn't, but in the first case you could well have, say, marked up your costs by e.g. 200% (a rip-off but not illegal) and charged your client 30.00 + VAT = 35.25, in which case you'd actually have to pay VAT of 5.25 - 1.75, i.e. 3.50, which is indeed 17.5% of the 20.00 "value that you added".

But the central point about expenses is that they are either expenses reimbursed, or they are amounts invoiced, but not both. If they are reimbursements, you don't need to think about VAT.

[Bradley]

Re:Split

But the central point about expenses is that they are either expenses reimbursed, or they are amounts invoiced, but not both. If they are reimbursements, you don't need to think about VAT.

So what you're saying is that anything you incur as part of fulfilling the contract is VATable as part of one service but anything you incur on behalf of the client e.g. licenses is non-VATable?

[philp]

Ahem! You either invoice your client for something, or you get them to defray an expense.

In the latter case you simply tell them that you paid 11.75 for a taxi, and they pay that. Whether that is justified or not is a separate question.

But the central point about expenses is that they are either expenses reimbursed, or they are amounts invoiced, but not both. If they are reimbursements, you don't need to think about VAT.

So if I understand correctly I can claim reimbursement from my client for the £10 taxi fare supported by the receipt (please note I can't "simply tell" them anything - they expect receipts for everything) and because it is a reimbursement (not an invoice) there is no VAT to charge. Do I include this anywhere on my VAT return? I have paid £1.49 in VAT to the taxi company.

[boredsenseless]

But you haven't got a receipt you've given it to the client so you can't claim the VAT

[expat]

So if I understand correctly I can claim reimbursement from my client for the £10 taxi fare supported by the receipt (please note I can't "simply tell" them anything - they expect receipts for everything) and because it is a reimbursement (not an invoice) there is no VAT to charge. Do I include this anywhere on my VAT return? I have paid £1.49 in VAT to the taxi company.

No! If you are being reimbursed for a taxi fare that cost 10.00, it is just as if the client had paid in the first place. You give them the receipt and they give you what you have paid. Any VAT is then their concern, not yours. You're not in the chain for VAT so you don't enter it anywhere. You haven't lost anything because you get reimbursed for what you actually paid: and you haven't paid 1.49 in VAT to the taxi company, it's the client that has paid 1.49 VAT.

Or (instead) you could invoice them for 8.51 + VAT. Then it's going through your books, and you are in the VAT chain. You "pay" the VAT of 1.49 that you charged - minus of course the VAT of 1.49 that you paid the taxi-driver.

Bradley: it's VATable (to you) or not according to whether it's treated as expenditure and income on your books, or as an expense paid by the client. For your client it's VATable anyway, the only question is whether you are in the chain or not.

More precisely, it's VATable for your client providing you have given them the correct VAT documentation: your invoice if you're invoicing it; or the taxi's VAT receipt if you're simply passing it on.