Contractor expense claim

[diesel]

Am i being petty for putting in an expense claim for £5 on ID photos? A fellow contractor laught at me...but why should i be out of pocket for client?


Also if i pay an hotel expense claim which costs say £120 Inc VAT. Do i charge client VAT on total (im VAT registered)

£120 + 20% = £144.

I am sure i used to do this, but same contractor said no way can u charge VAT twice. But if i paid a hotel bill of £120 from my own personal pocket, then if only charge client £120, then i have to pay corporation tax on this, then i will be out of pocket when reimbursed.
any clues?

[captainham]

Am i being petty for putting in an expense claim for £5 on ID photos? A fellow contractor laught at me...but why should i be out of pocket for client?


Also if i pay an hotel expense claim which costs say £120 Inc VAT. Do i charge client VAT on total (im VAT registered)

£120 + 20% = £144.

I am sure i used to do this, but same contractor said no way can u charge VAT twice. But if i paid a hotel bill of £120 from my own personal pocket, then if only charge client £120, then i have to pay corporation tax on this, then i will be out of pocket when reimbursed.
any clues?

Either try a search, or failing that, scroll down about 10 threads from this one:

http://forums.contractoruk.com/accou...tration-3.html

[BolshieBastard]

Am i being petty for putting in an expense claim for £5 on ID photos? A fellow contractor laught at me...but why should i be out of pocket for client?


Also if i pay an hotel expense claim which costs say £120 Inc VAT. Do i charge client VAT on total (im VAT registered)

£120 + 20% = £144.

I am sure i used to do this, but same contractor said no way can u charge VAT twice. But if i paid a hotel bill of £120 from my own personal pocket, then if only charge client £120, then i have to pay corporation tax on this, then i will be out of pocket when reimbursed.
any clues?

LOL!




























































































































































Jesus H Christ

[northernladuk]

Am i being petty for putting in an expense claim for £5 on ID photos? A fellow contractor laught at me...but why should i be out of pocket for client?


Also if i pay an hotel expense claim which costs say £120 Inc VAT. Do i charge client VAT on total (im VAT registered)

£120 + 20% = £144.

I am sure i used to do this, but same contractor said no way can u charge VAT twice. But if i paid a hotel bill of £120 from my own personal pocket, then if only charge client £120, then i have to pay corporation tax on this, then i will be out of pocket when reimbursed.
any clues?

Some peoples ability to run a business and understand their financies is beyond a joke.

The £5 you are crying about is coming out of your pocket in the end. All you are saving is 20% CT. I will let you work that one out.
Oh and the other huge benefit is you can claim it expenses and it doesn't count towards your dividends.

The fact you are worried about that but don't know how your VAT works is just... well.. what Bolshie says....

[Sausage Surprise]

VAT on VAT

Lifted some time ago from another thread...

Since you are VAT registered you are required to charge VAT on all invoices to your clients (in this case, the agency). The VAT you have already paid in your expenses is part of your cost of sales, so it is entirely legitimate that you add VAT to it - the underlying logic is that you have "added value" by performing the service itself, hence the tax is due. It is a myth that you are charging VAT on VAT, that doesn't actually matter at all. Nor is it a cost you your agency, since they will recover any VAT they pay out from their own clients.

By removing the VAT element the agency is effectively reducing their own tax bill at your expense. Hence, fraudulent behaviour.

This is all spelt out on the HMRC website (somewhere!!) and in Tolleys and in accepted practice. However, looking at the end-to-end transaction chain the nett VAT actually paid to HMRC works out the same, so they don't really care either way, it's only you that is losing money. You should speak to your own accountant for the official argument.

[Greg@CapitalCity]

Also if i pay an hotel expense claim which costs say £120 Inc VAT. Do i charge client VAT on total (im VAT registered)

£120 + 20% = £144.

I am sure i used to do this, but same contractor said no way can u charge VAT twice. But if i paid a hotel bill of £120 from my own personal pocket, then if only charge client £120, then i have to pay corporation tax on this, then i will be out of pocket when reimbursed.
any clues?

The £5 question seems to have been done to death here, but I can help you with the second part of your question. The answer is, you can charge your agency whatever you like, though you may find buried in your contract that any direct costs will be reimbursed at cost, and the agency may ask to see receipts to verify you are not overcharging.

Assuming you are on the flat rate scheme then the actual cost to you to £120, since you cannot recoup the VAT. Now, if want this transaction to be cost neutral for you, then you want to earn an income of £120. If you are an IT Contractor on 14.5% FRS, this means you will want to bill your agency £116.96 + VAT (once you work through the flat rate math you'll get a turnover figure of £120).

So, bill your agency £100 + VAT, and you'll be slightly out of pocket. Bill them £120 + VAT, and you be slightly better off. Bill them £116.96 + VAT and you'll be cost neutral but probably also get the agency on the phone asking where on earth you got that figure from. If I were you, invoice them for £120 + VAT and see what happens next.

[Kugel]

If you are an IT Contractor on 14.5% FRS, this means you will want to bill your agency £116.96 + VAT (once you work through the flat rate math you'll get a turnover figure of £120).

Makes no sense. 14.5% flat rate percentage is kind of compensation for inability to reclaim VAT on purchases.

[Segush]

I asked this very same question to my accountant some time ago and received the following response:

""
Below a link to HMRC’s disbursement guide:

HM Revenue & Customs: Costs passed on to clients - disbursements - and VAT

Essentially disbursements are expenses that are passed onto your customer(s) and how to deal with them from a VAT perspective.

Look at the information provided to allow you to make an informed decision on if VAT is to be passed onto your customer.
""

I have always claimed back the expenses + 20% on top for VAT otherwise I am worse off, my Client has always been happy to do it this way.

Regards

[mudskipper]

That's how I do it too. But if client wants to pay hotel/train/plane direct to avoid the double VAT, then that seems fair enough.

[Contreras]

I asked this very same question to my accountant some time ago and received the following response:

""
Below a link to HMRC’s disbursement guide:

HM Revenue & Customs: Costs passed on to clients - disbursements - and VAT

Essentially disbursements are expenses that are passed onto your customer(s) and how to deal with them from a VAT perspective.

Look at the information provided to allow you to make an informed decision on if VAT is to be passed onto your customer.
""

I have always claimed back the expenses + 20% on top for VAT otherwise I am worse off, my Client has always been happy to do it this way.

Although your action is fine, your accountant's response could be misleading in the context of the OP's question. Hotel expenses are never charged as disbursements (except of course if you were picking up the tab for Client Co. employees).

As already mentioned, the amount charged to the client is a matter between you and them, and then you must add VAT on top.