Reply to: Advice Needed -Consultancy asking for expenses to claim them as their own

[Old Greg]

Weird. But I guess YourCo could have agreed a daily rate inclusive of expenses and the Consultancy could have agreed with the client that expenses were chargeable.

Solution: offer to provide all mileage and expense receipts to Consultancy for an admin fee equal to 50% of the expenses.

[Craig@Clarity]

Your contract is with the agency not the consultancy, tell them to contact the agency.

^ This +1


We all know how "expenses recharged" on your contracting invoices go right?

1. Worker incurs expenses, submits it to their own ltd company, their ltd company reimburses the worker.
2. Ltd company invoices agency for £X plus VAT (can be whatever and not necessarily the original cost incurred)
3. Agency invoice the consultancy/end client the same £X plus VAT
4. Consultancy/end client settles the invoice and the "expenses recharged" money flows back to the ltd

Where we have step 2 missing from above as a result of not being agreed or there are no expenses, then whatever happens in 3 and 4 above is out of your control. I then refer back to BlasterBates's post above.

[BlasterBates]

We are making an assumption the consultancy is trying to reclaim the VAT which in the OP is not what is suggested. The agency may be paying yourCo a flat fee to cover expenses and day rate but then recover those expenses (minus the already claimed VAT) from the client. I don't see anything inherently wrong with that.

Indeed though it should be in the contract. However I suppose if the OP simply includes his mileage and expenses on the invoice there should be no problem and he wouldn't be out of pocket because they would be declared in his accounts as well.

[BlueSharp]

We are making an assumption the consultancy is trying to reclaim the VAT which in the OP is not what is suggested. The agency may be paying yourCo a flat fee to cover expenses and day rate but then recover those expenses (minus the already claimed VAT) from the client. I don't see anything inherently wrong with that.

[NotAllThere]

Yes it is tax fraud because expenses are not classified as income.

Depends on how the the expenses are dealt with. You may remember questions about VAT on expenses. If you charge the expenses on your invoice, you must also add VAT, and it's treated as income. Also, what Lance said.

The consultancy may, for example, have a contract with the client that says they will invoice (and therefore add VAT) for travel by their consultants by car at 70p* per mile, supported by a log of journeys carried out. Then, the OP can quite legitimately claim the mileage costs from his own company, and pass the mileage log to the consultancy to do what they will with it.

Really, the devil is in the detail of the consultancy's contract with the client. And that's none of the OP's business.

* This is somewhere around the region that the RAC calculate is the actual cost per mile for a 2.5 to 3.0l petrol engined car.

[eek]

like I said though. If you charge your client expenses you haven't actually incurred, then they are income in your own accounts. So no tax fraud.

I wonder if the consultancy has put some stupid statement in the contract like maximum expenses £x a day and then discovered it wasn't enough so need yours to even things out a bit.

Some of the gcloud rate cards a saw had that and you literally go - why did you put that in there.

[Lance]

Yes it is tax fraud because expenses are not classified as income. Good maybe they are doing it, but it very dubious.

like I said though. If you charge your client expenses you haven't actually incurred, then they are income in your own accounts. So no tax fraud.

[BlasterBates]

Re: "A company claiming travelling expenses which they don't incur is fraud. The travelling expenses need to be passed on to the contractor."

I don't think that's true - the wording on the contract between the consultancy and the company is ALL IMPORTANT.

For all you know, that contract may say something like " ... the supplier will be reimbursed by the company for expenses incurred by consultants supplied on provision of appropriate documentation (e.g. copies of receipts from the consultant)".

If it doesn't say in the contract (between the supplier and the company) that those expenses must have been reimbursed to the contractor, then that's not fraud - it's just sloppy wording in the (company/supplier) contract and profiteering by the supplier.

Under these circumstances, it's questionable ethically, but it's not out-and-out fraud.

Yes it is tax fraud because expenses are not classified as income. Good maybe they are doing it, but it very dubious.

[TheDogsNads]

Re: "A company claiming travelling expenses which they don't incur is fraud. The travelling expenses need to be passed on to the contractor."

I don't think that's true - the wording on the contract between the consultancy and the company is ALL IMPORTANT.

For all you know, that contract may say something like " ... the supplier will be reimbursed by the company for expenses incurred by consultants supplied on provision of appropriate documentation (e.g. copies of receipts from the consultant)".

If it doesn't say in the contract (between the supplier and the company) that those expenses must have been reimbursed to the contractor, then that's not fraud - it's just sloppy wording in the (company/supplier) contract and profiteering by the supplier.

Under these circumstances, it's questionable ethically, but it's not out-and-out fraud.

What?! You dont think claiming an expense you havent incurred and calling it an 'expense' isnt fraud?

Yes, the wording of the contract is important but the OP doesnt suggest in any way the contract is worded such. In actual fact, he suggest it isnt worded like this at all.

[dangerouswhensober]

A company claiming travelling expenses which they don't incur is fraud. The travelling expenses need to be passed on to the contractor.

Re: "A company claiming travelling expenses which they don't incur is fraud. The travelling expenses need to be passed on to the contractor."

I don't think that's true - the wording on the contract between the consultancy and the company is ALL IMPORTANT.

For all you know, that contract may say something like " ... the supplier will be reimbursed by the company for expenses incurred by consultants supplied on provision of appropriate documentation (e.g. copies of receipts from the consultant)".

If it doesn't say in the contract (between the supplier and the company) that those expenses must have been reimbursed to the contractor, then that's not fraud - it's just sloppy wording in the (company/supplier) contract and profiteering by the supplier.

Under these circumstances, it's questionable ethically, but it's not out-and-out fraud.

[BlasterBates]

A company claiming travelling expenses which they don't incur is fraud. The travelling expenses need to be passed on to the contractor.

I think this request should be refused. If they want to pay the travelling expenses, fair enough but this would be a financial disadvantage to the consultancy.

Your contract is with the agency not the consultancy, tell them to contact the agency. If you bill for expenses that are not paid then you can't claim them back from your company. Given a choice between submitting expenses that are not paid or take a cut, I would take the risk that they try to reduce your rate.

[Lance]

Yes, I'm not disputing that. What I'm saying is that it's fraud to knowingly charge somebody something you shouldn't. It's the business to business equivalent of putting in dodgy mileage claims or timesheets.

Now, of course, the contract between the two businesses may be sufficiently relaxed as to allow it but it feels unlikely. The consultancy here hasn't incurred any of these costs, yet they're going to invoice their own client for them (presumably) on the basis that they have.

I do accept it could be entirely above board, and like I said in my reply, I personally probably wouldn't really care as long as I'd covered myself - but it's an odd situation and not one I've ever personally come across.

we agree then
The consultancy are chancing their arm as I reckon the client would not be best pleased at such blatant profiteering, especially as they are quite likely to find out.

[TheDogsNads]

Never had an agency ask what expenses my co had paid me. If you were paid a day rate plus expenses, that's different. It sounds like the agency and or consultancy are now trying to suggest your rate included claimable expenses from them?

Be very careful here.

Just tell them your rate did not include any expenses element, you didnt claim any expenses via them and neither do you intend doing so.

Make very clear your co covered your expenses. These 'expenses' were not part of your day rate and have nothing to do with them.

[vwdan]

let's be clear.... An 'expense' charged to a client, is simply a cost to the client. There is no special treatment (unless it's a disbursement which is a different kettle of fish).
One hour of my time that I charge to a client is no different to me charging my client for an overnight hotel. As far as the charge to the client is concerned it's the same. The same VAT rate everything. The hotel doesn't need to exist, I might have stayed at a pal's house.

An 'expense' in my companies books is a cost to my company. That doesn't include my time, but does include my hotel (assuming it exists). I claim the VAT back on the hotel and the hotel cost brings down the profit and reduces the CT.

Those 2 descriptions are totally independent and unrelated. Unless there is a contractual clause around providing evidence.

Yes, I'm not disputing that. What I'm saying is that it's fraud to knowingly charge somebody something you shouldn't. It's the business to business equivalent of putting in dodgy mileage claims or timesheets.

Now, of course, the contract between the two businesses may be sufficiently relaxed as to allow it but it feels unlikely. The consultancy here hasn't incurred any of these costs, yet they're going to invoice their own client for them (presumably) on the basis that they have.

I do accept it could be entirely above board, and like I said in my reply, I personally probably wouldn't really care as long as I'd covered myself - but it's an odd situation and not one I've ever personally come across.

[Lance]

How can you determine that? The expense was incurred by a third party, not the consultancy and they appear to be misrepresenting that,



The required evidence is immaterial - what's material is the basis of the claim.

let's be clear.... An 'expense' charged to a client, is simply a cost to the client. There is no special treatment (unless it's a disbursement which is a different kettle of fish).
One hour of my time that I charge to a client is no different to me charging my client for an overnight hotel. As far as the charge to the client is concerned it's the same. The same VAT rate everything. The hotel doesn't need to exist, I might have stayed at a pal's house.

An 'expense' in my companies books is a cost to my company. That doesn't include my time, but does include my hotel (assuming it exists). I claim the VAT back on the hotel and the hotel cost brings down the profit and reduces the CT.

Those 2 descriptions are totally independent and unrelated. Unless there is a contractual clause around providing evidence.