Travel Expense Advice Needed

[captainham]

Thanks again for all the advice everyone.

Checked my contract and there is nothing in there about how I should process/ submit my expenses in relation to gross or net of VAT. Think i'll just submit them at cost plus VAT and see if they get through. If they get rejected then i'll just put it down to a loss on my part and not travel again

Cheers.

Depends how you want to play it, but if there are no explicit terms in the contract then to me that means you charge VAT on top of the full amount you originally paid (including the VAT you paid yourself).

So for me I'd be prepared to argue the toss as I don't see how the agent could argue anything else (assuming the contract states you are allowed to charge expenses of course, and assuming there are no terms that state you need prior written approval, in which case I hope you have that, etc etc, i.e., your end is squeaky clean, so to speak...).

[Wanderer]

You pay £156
You claim £156 from your company.
Your Company invoices £156+VAT to the client / agency
Your company pays the VAT to HMRC.

Many agencies and clients complain that you are adding VAT on VAT, but as others have explained, that isn't right - you are adding VAT onto the cost of you providing the service. They can then reclaim the VAT back from HMRC, so it's a zero sum game to all concerned.

It's not quite a zero sum game though....

Consider these scenarios with an expense of £156:

1. ContractorCo pays for the expense and recharges ClientCo £156 + VAT = £187.20. ClientCo claims back the added VAT. Net cost to ClientCo is £156.
   
2. ClientCo pays the expense directly, contractor never sees the bill. Net cost to ClientCo is £156 minus VAT = £130.
   
3. Contractor pays for the expense personally then gives ClientCo a receipt for £156 INC VAT. Client pays £156 into the contractor's personal bank account and claims back the VAT. Net cost to ClientCo is £130.

I can see why clients would like to avoid option 1. I'm sure lots of self employed people use options 2 or 3. Or would most people here run a mile from that for fear of causing bad IR35 karma?

[Contreras]

Hang on a moment...

If he is using the client's portal to claim a personal expense, are we sure it isn't a disbursement rather than a refund of a business expense? Which makes the VAT position correct, since the client's portal will be set up for employees. And if they are paying HisCo rather than him personally, someone is getting it wrong...

As the travel & accommodation was for himself then the expense is most definitely not a disbursement.

Using the client's portal does not make it a disbursement either.

Think of it as sleeping in the bed has "added value" to that being expensed.

It is must therefore be recharged and invoiced with VAT added.

The actual amount to recharge is a matter between him and the agency, just so long as VAT is added and HMRC get their cut.

[mudskipper]

At the risk of being shot...

As you're claiming via the employee system, can you not forget yourCo in the equation, and get the client to reimburse you directly? The expense never goes via yourCo.

[TheFaQQer]

1. ContractorCo pays for the expense and recharges ClientCo £156 + VAT = £187.20. ClientCo claims back the added VAT. Net cost to ClientCo is £156.
   
2. ClientCo pays the expense directly, contractor never sees the bill. Net cost to ClientCo is £156 minus VAT = £130.
   
3. Contractor pays for the expense personally then gives ClientCo a receipt for £156 INC VAT. Client pays £156 into the contractor's personal bank account and claims back the VAT. Net cost to ClientCo is £130.

I can see why clients would like to avoid option 1. I'm sure lots of self employed people use options 2 or 3. Or would most people here run a mile from that for fear of causing bad IR35 karma?

I'd do 1 or 2, but never 3. Current client books my flights and pays for them direct, as they would with all their suppliers that they ask to travel by plane, so I have no issue with that.

I'd never allow the client to go near my personal bank account - do it properly. If they will only reimburse the £130 then I would take the hit and bear that in mind for every other time that they ask whether I can be available on another site.

[TheFaQQer]

At the risk of being shot...

As you're claiming via the employee system, can you not forget yourCo in the equation, and get the client to reimburse you directly? The expense never goes via yourCo.

You could.

Would the client co expect that all their suppliers do that, though, or only people that they think of as employees?

If they pay that way for all their suppliers, then it's not a differentiator, so isn't an IR35 indicator; if they don't then I'd steer well clear of reimbursing it that way.

[Contreras]

At the risk of being shot...

As you're claiming via the employee system, can you not forget yourCo in the equation, and get the client to reimburse you directly? The expense never goes via yourCo.

Hector understandably gets quite upset about cash-in-hand payments made with the intention to circumvent VAT rules.

You could make this legit by declaring the payment as BiK. The company would need to issue a VAT invoice to match the gross amount received and then pay the FRS percentage as normal.