Buying hardware on behalf of client

[d000hg]

I am non-FRS vat registered, my client is overseas in a non-VAT country.

I see 3 options after a little more thought:

1. Buy the equipment and explicitly sell it to my client, they own it as soon as they pay. I claim back the VAT on my purchase but what about selling it to them? Is this sale subject to sales VAT, do I charge the exclusive or inclusive price (not looking to make a profit)?
2. Buy the equipment and charge them for "needed materials" i.e. I own it. I claim back the VAT and charge them the cost price not including VAT?
3. Same as 2. but I put some clause "client may purchase the test hardware for $1 within the next X months/years.

Did I get the details correct?

3. Covers the real-life case: they think it's theirs but are never realistically going to want it back. Is this OK or am I causing more confusion setting an artificially low price?

FWIW these are low-cost 2nd-hand machines we're looking at. £200-400 a pop ideally bought from a company but possibly from individuals on eBay, etc.

[VectraMan]

Sounds like you need to establish with your client whether they're expecting to own the equipment (i.e. you're buying it for them), or whether they're paying you extra to cover your equipment costs.

I guess if the former and you hadn't been paid for it yet at your year end it would be "stock" that you'd have to list on your balance sheet, and that would affect CT.

[The Agents View]

If you are simply purchasing some hardware as it is needed for your current contract and your client has agreed to reimburse you, then you would:

1. Reclaim the VAT on the purchase as usual, like any other company purchase, unless you are on the FRS

2. Bill your client for the total cost (inc. VAT) of the hardware. Because this forms part of your service, you charge VAT on the full cost. (so if the hardware cost £100 + VAT, you would invoice for £120 + VAT).

3. The hardware remains your companies property.

However, if you truly are purchasing the goods on your clients behalf, that is, they will own it and you are simply acting as a middle man in the transaction, then you can treat it as a disbursement for VAT purposes:

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

You do not claim the input VAT, but you also do not re-charge any extra VAT to your client. In the above example, you would add £120 to our invoice but not charge VAT on it. You would pass on the original VAT invoice to your client so they can reclaim the input VAT themselves.

Plenty of information including examples of what could be counted as a disbursement for VAT purposes and how to deal with them.

Can you not just bill it as Hardware rental, and charge them the purchase amount??

[TheCyclingProgrammer]

If you are simply purchasing some hardware as it is needed for your current contract and your client has agreed to reimburse you, then you would:

1. Reclaim the VAT on the purchase as usual, like any other company purchase, unless you are on the FRS

2. Bill your client for the total cost (inc. VAT) of the hardware. Because this forms part of your service, you charge VAT on the full cost. (so if the hardware cost £100 + VAT, you would invoice for £120 + VAT).

3. The hardware remains your companies property.

However, if you truly are purchasing the goods on your clients behalf, that is, they will own it and you are simply acting as a middle man in the transaction, then you can treat it as a disbursement for VAT purposes:

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

You do not claim the input VAT, but you also do not re-charge any extra VAT to your client. In the above example, you would add £120 to our invoice but not charge VAT on it. You would pass on the original VAT invoice to your client so they can reclaim the input VAT themselves.

Plenty of information including examples of what could be counted as a disbursement for VAT purposes and how to deal with them.

[BoredBloke]

I'm not on FRS.

As for ownership - I don't know. If I charge the client the purchase cost then do they automatically own them and it counts as a sale? Or is the default that I own the assets and the client's payment is just another piece of income?

If it makes a difference, the client is outside the EU.

How much are you lookin g to purchase?

remember to use Quidco for some cashback on top of the invoice amount!

[Clare@InTouch]

I can't really comment on the legal issues of this, my guess is that it would depend on whether they pay the bill expecting you to hand over the goods or they pay the bill knowing that the purchase of the equipment was something they had to fund in order to get the job done.

From an accountancy point of view the invoice would count as income and be offset against the purchase of the equipment.

[d000hg]

I'm not on FRS.

As for ownership - I don't know. If I charge the client the purchase cost then do they automatically own them and it counts as a sale? Or is the default that I own the assets and the client's payment is just another piece of income?

If it makes a difference, the client is outside the EU.

[Clare@InTouch]

Are you keeping the items in question? If so then I don't see how it's different from any other asset purchase - you can reclaim the VAT if you're Standard Rated, and if it's over £2,000 then you can reclaim the VAT if you're Flat Rate too.

If you're buying them but they will be passed onto the client then they would be items for resale and you couldn't reclaim the VAT if you're Flat Rate but still could if you were Standard.

[Scrag Meister]

I probably need to buy some PC hardware for testing, for which I'll bill my client on my invoice as an extra line item.

What happens with this regarding VAT and company assets, etc? Once the client pays, do they own them legally now or do I if I word it "purchase of test equipment"? In which case can I claim back VAT on purchases that I'm re-selling?

Are you on the FRS? If not, then yes claim back on your purchases and pay on your sales as per usual.

If not then thats one for the accountants. Not sure how the VAT would work on the sales side.

Interesting question.

[d000hg]

I probably need to buy some PC hardware for testing, for which I'll bill my client on my invoice as an extra line item.

What happens with this regarding VAT and company assets, etc? Once the client pays, do they own them legally now or do I if I word it "purchase of test equipment"? In which case can I claim back VAT on purchases that I'm re-selling?