About to plunge into having my own ltd co. - questions

[TheCyclingProgrammer]

1. You do not have an employer when you have your own limited company.
2. All money coming in to your company is revenue.
3. You can only claim for what you actually spend.

1. Well, technically your own Ltd company can be your employer. It is your own company that you put in expense claims with.

3. Correct, when placing expense claims to your company, but you can bill the client for expenses at whatever rate you want and if the client has agreed to pay a flat rate of £5 a day for lunch then that is what you invoice them for.

[TheCyclingProgrammer]

Everybody has pretty much covered it, but the process is quite simple:

1) You claim for any out-of-pocket expenses (travel, lunch, mileage etc.) from YourCo in accordance with HMRC expenses rules (e.g. the 24 month rule for travel/subsistence, specific rates for mileage). This is how you get your money back and the expense payment forms part of your company expenses.

2) Your company re-bills these expenses to the client according to the agreement between YourCo and the client (so in your case you've agreed to re-bill mileage at 10p per mile rather than the HMRC 40p per mile, and a flat rate of £5 a day for lunch etc.).

3) Important: when you re-bill these expenses, they form part of your overall service so if you are registered for VAT, you MUST charge VAT on the total value of the re-billed expenses. This includes any VAT on the original supply to you as well.

Example:

You purchase a train ticket for £12.50 (includes no VAT as train fares are zero-rated), some lunch (£3.50 for a sandwich) and you also claim for 10 miles at 40p per mile from YourCo (£4). You put in an expense claim and YourCo pays you back £20 for your out-of-pocket expenses.

You invoice company for the above expenses. You invoice them for lunch (at the agreed flat rate of £5 for the day), the train ticket and the mileage at the agreed rate of 10p per mile. Net invoice amount is (£5 + £12.50 + £1) £18.50.

If you are registered for VAT, you should charge VAT on the above amount, so the total amount invoiced is £21.74. The fact that a train ticket is zero-rated or that the other expenses may have included VAT already is irrelevant as you aren't supplying the client with a train ticket or food etc., you are invoicing them for your service which is always VATable.

Its worth noting that based on some of the posts on this forum, some clients (particularly agencies) have been known to get funny about charging VAT on top of expenses, claiming that you "cannot charge VAT on top of VAT". They are of course talking nonsense, you have to charge VAT on your re-billed expenses regardless of how you came to the net amount.

They can of course insist you strip the VAT on the original supply from the net amount of your invoice but this is between you and the client/agency; it would be equivalent to giving them a discount to the value of the original input VAT on the expense and if you are on the flat-rate scheme you end up losing out.