Reply to: Client will not accept invoice and VAT charge for expenses

[LisaContractorUmbrella]

@LisaContractorUmbrella - thanks very much!

You're welcome

[meanttobeworking]

Thanks Robot, all these costs were incurred in USA, so no VAT is included on original costs. Appreciate your reply.

[Robot]

I've completed an expense claim form (provided by the agency) and a copy of the receipts.

They've got back to me now, apparently I was told wrong on the phone, I should have invoiced them for it after all. Still unclear as to whether I should be adding VAT to it or not, but have sent their accountant guy two invoices, one with VAT and one without.

I seem to gather from the above that if I'm invoicing them and I'm VAT registered, I have to charge VAT. Would you agree?

I appreciate your help!

Yes but, example

Train Fare £ 50.00 (excludes VAT)
Hotel £120.00 (includes VAT)

Sales invoice / expenses claim

Expenses £150 (note you take the VAT off the hotel bill)

VAT @ 20% 30
---------
£180.00

Some agencies don't bother about extracting the VAT on the expenses, some do, especially the ones that deal with banks. VAT on VAT as some said above, the bank cannot reclaim the input VAT.

Cheers

Robot

[meanttobeworking]

@LisaContractorUmbrella - thanks very much!

[LisaContractorUmbrella]

I've completed an expense claim form (provided by the agency) and a copy of the receipts.

They've got back to me now, apparently I was told wrong on the phone, I should have invoiced them for it after all. Still unclear as to whether I should be adding VAT to it or not, but have sent their accountant guy two invoices, one with VAT and one without.

I seem to gather from the above that if I'm invoicing them and I'm VAT registered, I have to charge VAT. Would you agree?

I appreciate your help!

Hi meanttobeworking

If you are VAT registered then you should raise the invoice to the agency for the value of the expense plus VAT i.e. if you have incurred an expense of £120.00 including VAT then your invoice would be for £120 plus VAT. As you have given your original receipts to the agency they will add the VAT from your invoice and the VAT element of the expense to their input tax which will then be offset against the VAT element of their sales invoices with the balance being payable to HMR&C.

HTH

[meanttobeworking]

I've completed an expense claim form (provided by the agency) and a copy of the receipts.

They've got back to me now, apparently I was told wrong on the phone, I should have invoiced them for it after all. Still unclear as to whether I should be adding VAT to it or not, but have sent their accountant guy two invoices, one with VAT and one without.

I seem to gather from the above that if I'm invoicing them and I'm VAT registered, I have to charge VAT. Would you agree?

I appreciate your help!

[LisaContractorUmbrella]

They haven't been added to the invoice amount, they are being settled independantly. I thought this slightly odd when I first called them - I said I was assuming I needed to add it to the invoice amount but they said "no".

So what paperwork have they ask you for to support the claim?

[meanttobeworking]

If the expenses have been added to the invoice value then you should add VAT to the total i.e. £1100 + Vat

They haven't been added to the invoice amount, they are being settled independantly. I thought this slightly odd when I first called them - I said I was assuming I needed to add it to the invoice amount but they said "no".

[LisaContractorUmbrella]

How about this one? I recently travelled abroad (USA) for my client. I paid for a couple of taxi's over there (everything else was covered by a permie I was with). On my agent's instruction, I invoiced for my time in the normal way, and completed an expenses form provided by my agent (signed off by the client).

The agent will pay the expenses reimbursement into my business account - although they have not indicated to me if they will be adding VAT to it.

How do I account for this? I'm currently doing this (using made up figures, and pretending there is no PAYE salary so as to focus on the question at hand):

Invoice paid to company account: £1200 (1000+VAT)
Expenses reimbursed to company account: £100
Total income to company account: £1300

Save 13.5% of £1200 for VAT (on FRS) : -£162
Re-imburse myself for all expenses, including £100 for taxis in USA : -£200

Remaining balance: £938

Save 20% for CT: -£187.60

Available for dividend: £750.40


So, I'm not charging, or paying back to HMRC any VAT on the £100 expenses. Neither am I factoring in that income for CT purposes.

Am I right in doing this? I'm not looking to avoid paying anything that's due (even if I end up losing out by a few quid) as the actual total of the expenses claim is less than £70, I just want to ensure I keep my accounts correctly.

If the expenses have been added to the invoice value then you should add VAT to the total i.e. £1100 + Vat

[meanttobeworking]

How about this one? I recently travelled abroad (USA) for my client. I paid for a couple of taxi's over there (everything else was covered by a permie I was with). On my agent's instruction, I invoiced for my time in the normal way, and completed an expenses form provided by my agent (signed off by the client).

The agent will pay the expenses reimbursement into my business account - although they have not indicated to me if they will be adding VAT to it.

How do I account for this? I'm currently doing this (using made up figures, and pretending there is no PAYE salary so as to focus on the question at hand):

Invoice paid to company account: £1200 (1000+VAT)
Expenses reimbursed to company account: £100
Total income to company account: £1300

Save 13.5% of £1200 for VAT (on FRS) : -£162
Re-imburse myself for all expenses, including £100 for taxis in USA : -£200

Remaining balance: £938

Save 20% for CT: -£187.60

Available for dividend: £750.40


So, I'm not charging, or paying back to HMRC any VAT on the £100 expenses. Neither am I factoring in that income for CT purposes.

Am I right in doing this? I'm not looking to avoid paying anything that's due (even if I end up losing out by a few quid) as the actual total of the expenses claim is less than £70, I just want to ensure I keep my accounts correctly.

[SueEllen]

You spend x + VAT, and the client pays (x + VAT) to you (or your company). What is this fuss about then? You did not spend any money, your client did. Why would you want to claim VAT which your client has paid?
Or am I missing something here?

I think you are missing out the client's bookkeeping/accounting methods and the different rates of VAT on items. For example train and air travel are zero rated.

So if you send a contractor on a train and they claim expenses which just includes the train travel on the invoice you have to pay the VAT on it as it's a service to you.

There as if you send an employee you can't reclaim VAT on the train travel as it's zero rated.

If you put both expenses through as being part of your company's expenses then you lose out on reclaiming the contractor's VAT.

[Wanderer]

VAT is a tax that is payable to HMR&C and the rules are the rules. In this case, if the agency has the receipt then they will be able to reclaim the VAT element of the expense as well as the VAT element of the invoice which details the expense; if companies are VAT registered they cannot 'lose out' unless they don't have a VAT receipt.

Ahh, that makes sense now - so they claim back the VAT twice, once on your invoice and secondly using the VAT receipts that you submit. Makes sense now!

[diesel]

i cant understand the fuss..last year i did quite a bit overseas work and claimed back hotel bills, food etc via agency PLUS VAT.

Yes in some cases it was VAT on VAT but thats how i see the system working and it was not questioned by the client.

[rd409]

You spend x + VAT, and the client pays (x + VAT) to you (or your company). What is this fuss about then? You did not spend any money, your client did. Why would you want to claim VAT which your client has paid?
Or am I missing something here?

[Moscow Mule]

So from a client's point of view, it's better to reimburse a worker personally than to have it as a rechargable expense by the workers company. Or am I missing something here?

The client most likely isn't on the VAT flat rate scheme.

Every penny he spends in VAT on you comes off his VAT bill on what he charges out.