VAT on Stuff

[TheCyclingProgrammer]

Parasol do invoice in exactly the way I described, and if you talk to the VAT man that's exactly the way its supposed to be done.

The VAT man doesnt care how you re-bill your expenses as long as you charge VAT. If your contract states that expenses should be re-billed net of VAT, then that's what you should charge. Equally it could be a flat or capped amount. There is no VAT rule that says you must bill them for the gross amount and then add VAT on top.

[CoolCat]

This has been discussed on here a lot. Whether you re-bill expenses to a client net or gross of VAT is a matter of agreement between you and the client, or in this case the client, you and the umbrella. HMRC rules simply state that VAT must be charged, not what the net cost should be.

You are right in that if Parasol have invoiced for £100 net, then the client owes them £20. But it may be that they've invoiced £100 gross. You should have checked with Parasol whether they treat expenses in their portal as net or gross of any VAT and how they re-bill these.

Parasol do invoice in exactly the way I described, and if you talk to the VAT man that's exactly the way its supposed to be done.

[TheCyclingProgrammer]

This has been discussed on here a lot. Whether you re-bill expenses to a client net or gross of VAT is a matter of agreement between you and the client, or in this case the client, you and the umbrella. HMRC rules simply state that VAT must be charged, not what the net cost should be.

You are right in that if Parasol have invoiced for £100 net, then the client owes them £20. But it may be that they've invoiced £100 gross. You should have checked with Parasol whether they treat expenses in their portal as net or gross of any VAT and how they re-bill these.

[CoolCat]

I spend £100, get a receipt that doesn't have a VAT breakdown. - this bit is fine

You should then log it in the Parasol portal as a "client billable expense", once this is submitted and approved Parasol will send the agency an invoice but add VAT to it. So VAT gets added to any VAT you have already paid. (I know its silly but that's the way the tax rules are written apparently)

Agency bills the client - not your problem buy they should be adding VAT correctly

Agency sends the £100 to Parasol - this bit is wrong, as the agency owes Parasol 120, ie the 100 plus 20 VAT

Parasol now has the £100 from the client, yes but they owe 20 % to the tax man

Parasol gives me £83.33, they have only had part payment from the agency

Good luck


I lose £16.67

[LisaContractorUmbrella]

Thanks for the reply Lisa, much appreciated.

You're welcome

[seabro]

The invoice raised to the client should have been working days x rate plus expenses chargeable to the client plus VAT - so, let's say 5 days x £200 = £1000 plus £100 expenses = £1100 plus VAT at 20% (£220) = £1320.00. This is then paid, by the agency, to your umbrella company - the VAT element of £220 is payable to HMRC and the £100 chargeable expense is payable to you.

VAT on a purchase is reclaimable against the VAT payable on sales so there should be no reason why you shouldn't have received the full value of the expense incurred provided that the agency has your original receipt.

Thanks for the reply Lisa, much appreciated.

[LisaContractorUmbrella]

Hi,

Is this right? It might be but wanted to confirm.

I spend £100, get a receipt that doesn't have a VAT breakdown.
Agency bills the client
Agency sends the £100 to Parasol
Parasol now has the £100 from the client
Parasol gives me £83.33

I lose £16.67

Many thanks,
seabro

The invoice raised to the client should have been working days x rate plus expenses chargeable to the client plus VAT - so, let's say 5 days x £200 = £1000 plus £100 expenses = £1100 plus VAT at 20% (£220) = £1320.00. This is then paid, by the agency, to your umbrella company - the VAT element of £220 is payable to HMRC and the £100 chargeable expense is payable to you.

VAT on a purchase is reclaimable against the VAT payable on sales so there should be no reason why you shouldn't have received the full value of the expense incurred provided that the agency has your original receipt.

[northernladuk]

This relates to 'VAT treatment of umbrella expenses incurred in the Eurozone'

Isn't that what you are doing? I thought it went through the process of how VAT works with brollies which would help. Didn't read it in detail sorry.

[seabro]

Or this but it does mention a VAT element
http://forums.contractoruk.com/umbre...-expenses.html

Thanks.

[seabro]

This help? It's even written by parasol

Contractor guide to the VAT treatment of umbrella expenses incurred in the Eurozone

But your best bet is to speak to Parasol as they are your employer.

This relates to 'VAT treatment of umbrella expenses incurred in the Eurozone'

[northernladuk]

Or this but it does mention a VAT element
http://forums.contractoruk.com/umbre...-expenses.html

[northernladuk]

This help? It's even written by parasol

But your best bet is to speak to Parasol as they are your employer.

[LondonManc]

Ask Lisa on here or Parasol themselves for a more detailed breakdown.

[seabro]

Hi,

Is this right? It might be but wanted to confirm.

I spend £100, get a receipt that doesn't have a VAT breakdown.
Agency bills the client
Agency sends the £100 to Parasol
Parasol now has the £100 from the client
Parasol gives me £83.33

I lose £16.67

Many thanks,
seabro