Reply to: Expenses

[PayMatters]

PayMatters, you seem to be saying one thing and then another....

If it's not a disbursement then you don't invoice the expense at cost minus VAT...

But you also seem to be saying that how you bill it. Just to be clear, which one are you arguing for?

I'm pretty sure I've said the same thing all along but I'm quite happy to call it a day on the subject!

All I will say is that the idea of recharging expenses to your client is not to make a profit on them but if that's what you're doing and if the client is happy with that then you're doing well for yourself and good luck to you.

[ASB]

PayMatters, you seem to be saying one thing and then another....

If it's not a disbursement then you don't invoice the expense at cost minus VAT...

But you also seem to be saying that how you bill it. Just to be clear, which one are you arguing for?

[ducks for cover]
Ignoring disbursements the simple guidance from HMRC is that if you are recharging expenses then irrespective of whether they are VAT able or not then you charge on the the expenses at the gross price plus vat if you are vat registered, i.e. VAT should be added to all the expenses because they are an integral part of the service. You then need to pay this vat to HMRC (and client generally reclaims it).

The actual VAT you have paid (if any) is reclaimable.

However, the actual fact is that how you decide to recharge the expenses (if at all) is a commercial decision between you and the customer - the only relevance to HMRC is that vat is charged on them (and paid over to HMRC).

It may be that commercially you choose to discount them by the amount of any VAT you have paid - you are at liberty to do this. Equally it may be that you choose to surchange them by a margin, or a flat rate, whatever you want. It is simply trading income.
[/ducks for cover]

[Beefy198]

PayMatters, you seem to be saying one thing and then another....

If it's not a disbursement then you don't invoice the expense at cost minus VAT...

But you also seem to be saying that how you bill it. Just to be clear, which one are you arguing for?

[Gravy Train]

[QUOTE=blacjac;820003]

Just to be clear, if as part of my service I stay in a hotel for £100 per night plus VAT (total £115), then I bill my client £115 + VAT (total £132.25).

QUOTE]

And you hand back (if not on the FRS) the £17.25 VAT charged, not £17.25 plus £15 from original bill.

[blacjac]

All I'm saying is you don't recharge the gross cost plus vat if you're VAT registered. And this is correct whether it's a disbursement or not.

I guess this where you and every accountant I have delt with differ then...

Just to be clear, if as part of my service I stay in a hotel for £100 per night plus VAT (total £115), then I bill my client £115 + VAT (total £132.25).

This is because I am adding the hotel cost to my service charge and not claiming the cost back from the client.
As per my original post.

the smiley was because this topic has been covered on here many times over the years, but around every 3 months a new brolly springs up and tries to convince everyone they know the rules better.......

[PayMatters]

Agree normally a disbursement is something that say your solicitor pays for on your behalf i.e. a land registry cost.

[Beefy198]

I add the VAT on anything. I called the VAT helpline once and explained my situation and the exact words they used were: "that's not a disbursement".

[PayMatters]

Yes I do know all this! I'd like to think I learnt something having worked as a Chartered Accountant for 20 years.

All I'm saying is you don't recharge the gross cost plus vat if you're VAT registered. And this is correct whether it's a disbursement or not.

If you spend £115 on a hotel and can claim the £15 vat back you do not recharge the client £115 plus VAT. To do so would mean you make £15 profit on the expense which in my opinion is not correct. If it's a disbursement you don't claim the vat back or charge vat on the recharge but the cost to the end client is still £115.

I was pulled up on it and accused that the advice I was giving was incorrect.

Maybe we've just got our wires crossed and are actually saying the same thing?

All the Best, PayMatters

[blacjac]

Yes even if the hotel bill is a disbursement (which is unlikely) you don't charge it plus vat.

Have you actually read the link?

There are many incidental costs that your business might incur that you can't exclude from the VAT calculation when you invoice your customers.

Any costs that your business incurs itself in the course of supplying goods or services to customers are not disbursements for VAT purposes. It's you, and not your customer, who purchases the goods or services

they're known as 'recharges', and not disbursements, for VAT. You'll have to charge VAT on them whether you paid any VAT or not.

[PayMatters]

Yes even if the hotel bill is a disbursement (which is unlikely) you don't charge it plus vat.

[ASB]

<removed>

The horses mouth:-

http://www.hmrc.gov.uk/vat/managing/...bursements.htm

[PayMatters]

<removed>

[blacjac]

If your hotel bill is 115 and 15 of that is VAT then to recharge the cost to your client (assuming you can claim all the vat back on the hotel bill) you would charge your net cost plus vat i.e. 100 plus 15 (so it is exactly the same as the client paying for the bill themselves). Agree you'd make more money if you charged 115 plus vat but that's not how it should strictly work.

Like I said:

Not if you are billing it as part of your service you shouldn't

[PayMatters]

Not if you are billing it as part of your service you shouldn't

If your hotel bill is 115 and 15 of that is VAT then to recharge the cost to your client (assuming you can claim all the vat back on the hotel bill) you would charge your net cost plus vat i.e. 100 plus 15 (so it is exactly the same as the client paying for the bill themselves). Agree you'd make more money if you charged 115 plus vat but that's not how it should strictly work.

[Bluebird]

Cheers yes, i did this ... but then again, you have to declare the profit on the VAT from the FRS scheme and then pay CT on it... i believe

correct, but then profit less 21% is better than no profit at all...