Charging VAT on congestion charge?

[Nemo Sum]

The business has received a bill on which the congestion charge has been invoiced for among other things.

Now I believe the congestion charge can be charged to us (does cause a slight annoyance when they have a separate call out fee which in my view should cover that but moving on, we have been charged VAT on top of that which I was under the impression was illegal/incorrect as it is "outside the scope of VAT".

Please tell me if I'm wrong or not so I can get the bill paid and think about vastly more important things. Thank you!

[EU_Foreigner]

As a business, it does not matter either way as you would claim it back.

If you take the train, you do not pay VAT, but if you charge it through to a business you do pay VAT.

[Nemo Sum]

I understand that for general travel you are correct but in the specific case of the congestion charge, I didn't think there was VAT charged on it therefor there is no VAT to claim back or charge for by the other company.

[SVTRick]

Vat is included in parking charges so why not the C Charge
Any extras we incur are just added to invoice and vat is charged

[Cat]

A 5 second Google gives:-

HMRC Introduction to VAT said:

There are some things that aren't in the UK VAT system at all - they're outside the scope of VAT. They are not taxable supplies and no VAT is charged on them. Items that are outside the scope of VAT include:
- non-business activities like a hobby - for example, you might sell some stamps from your collection
- fees that are fixed by law - known as 'statutory fees' - for example the congestion charge or vehicle MoT tests

From here.

HTH

Cat

[essayer]

But another 5 second google gives:

http://www.hmrc.gov.uk/vat/managing/charging/disbu...

They are correct to add VAT to the CC fee because it's being passed to you as part of the service they provided you. Whether it is something you should be paying for is down to whatever you've agreed with them contractually.

Edited by essayer on Monday 3rd March 11:26

[NPI]

Nemo Sum said:

I understand that for general travel you are correct but in the specific case of the congestion charge, I didn't think there was VAT charged on it therefor there is no VAT to claim back or charge for by the other company.

Most (all?) travel doesn't have VAT on it from the original source. There's no VAT on train or plane tickets.

[Nemo Sum]

Cat I did find that link however it didn't help me to come to a concrete conclusion hence the post. Plus that 5 second google throws up a few other links to discussions where the congestion charge has been treated as a disbursement leading on nicely to...

essayer said:

But another 5 second google gives:

http://www.hmrc.gov.uk/vat/managing/charging/disbu...

They are correct to add VAT to the CC fee because it's being passed to you as part of the service they provided you. Whether it is something you should be paying for is down to whatever you've agreed with them contractually.

Edited by essayer on Monday 3rd March 11:26

The pertinent info I believe to be below.

HMRC said:

What isn't a disbursement for VAT purposes:

...could include travelling expenses and your own postage costs...costs that your business incurs itself in the course of supplying goods or services to customers are not disbursements for VAT purposes...If you do show them separately when you invoice your customers then they're known as 'recharges'...You'll have to charge VAT on them whether you paid any VAT or not

Thank you all for your help!

[Red Devil]

Nemo Sum said:

The pertinent info I believe to be below.

HMRC said:

What isn't a disbursement for VAT purposes:

...could include travelling expenses and your own postage costs...costs that your business incurs itself in the course of supplying goods or services to customers are not disbursements for VAT purposes...If you do show them separately when you invoice your customers then they're known as 'recharges'...You'll have to charge VAT on them whether you paid any VAT or not

Thank you all for your help!

The key to the castle is the bit in bold. If the answer is yes then VAT is chargeable just like it is on postage and packing when buying by mail order rather going to a shop.

Contrast that with what a solicitor will pay on your behalf on a property purchase instead of you having to do it yourself (e.g. search and Land Registry fees, Stamp Duty, etc)

[Nemo Sum]

Red Devil said:

The key to the castle is the bit in bold. If the answer is yes then VAT is chargeable just like it is on postage and packing when buying by mail order rather going to a shop.

Contrast that with what a solicitor will pay on your behalf on a property purchase instead of you having to do it yourself (e.g. search and Land Registry fees, Stamp Duty, etc)

To give more insight into whether the charge is relevant, the invoice is for on site servicing of equipment and the costs associated with travelling to the premises.

[Observer2]

Nemo Sum said:

Red Devil said:

The key to the castle is the bit in bold. If the answer is yes then VAT is chargeable just like it is on postage and packing when buying by mail order rather going to a shop.

Contrast that with what a solicitor will pay on your behalf on a property purchase instead of you having to do it yourself (e.g. search and Land Registry fees, Stamp Duty, etc)

To give more insight into whether the charge is relevant, the invoice is for on site servicing of equipment and the costs associated with travelling to the premises.

If the charge for the service is the defined fee plus travel costs, then VAT is chargeable on the total of fees plus the expenses added to the fees. If the contractual arrangement is for "charges and reimbursement of travel costs" then the reimbursement element is simply the total cost, whether or not any VAT is included. However, the VAT content is not recoverable by you, as the customer, because there is no taxable supply to you.

[Red Devil]

Observer2 said:

Nemo Sum said:

Red Devil said:

The key to the castle is the bit in bold. If the answer is yes then VAT is chargeable just like it is on postage and packing when buying by mail order rather going to a shop.

Contrast that with what a solicitor will pay on your behalf on a property purchase instead of you having to do it yourself (e.g. search and Land Registry fees, Stamp Duty, etc)

To give more insight into whether the charge is relevant, the invoice is for on site servicing of equipment and the costs associated with travelling to the premises.

If the charge for the service is the defined fee plus travel costs, then VAT is chargeable on the total of fees plus the expenses added to the fees. If the contractual arrangement is for "charges and reimbursement of travel costs" then the reimbursement element is simply the total cost, whether or not any VAT is included. However, the VAT content is not recoverable by you, as the customer, because there is no taxable supply to you.

It makes no difference what the contractual arrangement may say. The contract cannot override VAT regulations. The original question was whether VAT was chargeable on top of the congestion charge. As the latter was payable in respect of the vehicle belonging to or hired by the business providing the service, it is a direct cost to that business. Therefore it is a recharge not a disbursement. As such it is subject to VAT and there is no way HMRC will accept that it isn't.

http://www.hmrc.gov.uk/vat/managing/charging/disbu...

[Observer2]

Red Devil said:

It makes no difference what the contractual arrangement may say. The contract cannot override VAT regulations. The original question was whether VAT was chargeable on top of the congestion charge. As the latter was payable in respect of the vehicle belonging to or hired by the business providing the service, it is a direct cost to that business. Therefore it is a recharge not a disbursement. As such it is subject to VAT and there is no way HMRC will accept that it isn't.

http://www.hmrc.gov.uk/vat/managing/charging/disbu...

Correction accepted. My error.