VAT on expenses invoices

[Nick Grant]

I am a consultant, with my own limited company and one of the companies I do some work for is querying my expenses invoices. I am in agreement with my accountants assessment of the situation but thier accountant does not agree. I was wondering if I could get some help. I have been invoicing them in the same way for a year but no they have decided that they don't like it anymore.

As part of the work I do I have to travel occasionally, arrange team events and other activities and I am able to recharge these expenses as part of the service I offer. I invoice these seperatley to my day rate for simplicity.

On my expenses invoices I charge VAT on everything, even if those expenses attracted VAT charges at the time. As I understand these invoices they are not disbursments but are part of my service charge and therefore must have VAT charged on them. As per this link...

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

The company that I am invoicing beleives I should only be adding VAT to things that didn't have VAT on in the first place.

Thoughts please?

Edited by Nick Grant on Tuesday 18th March 09:47

[wheelerc]

I believe you and your account are correct. The link you posted seems to clearly support that. Have you sent that link to their accountants?

[Nick Grant]

Thanks for confirming. I have just telephoned HMRC who also confirmed this to be the case, citing Public Notice 700 Section 25 of the VAT guide.

Yes I have emailed the link to the other accountant, but he doesn't seem to believe it.

Edited by Nick Grant on Tuesday 18th March 10:26

[Eric Mc]

I presume the customer is VAT registered?

[Nick Grant]

Yes Eric

[Eric Mc]

If they are, then they should just accept your invoices as they are and reclaim any VAT you are charging. It is of no real consequence to them as they can reclaim any VAT they are charged.

I would stick to what you are doing.

[Nick Grant]

Thanks Eric, appreciate the advice.

[anonymous-user]

And tell them to get a new accountant.

[sumo69]

OP - I am a bit late on this but you are 100% correct as these are clearly part of your cost of providing the service.

I have quite a few 1 man companies and they all invoice like this without any issue.

David

[Nick Grant]

Thanks guys, it's nice to know I'm not going mad

[worsy]

Just out of interest, I would have thought your travel was not a disbursement, but hiring a room for a training course delivery was for example.

edited to say, I re-read what you wrote and you are adding VAT to expenses, so not a disbursement. If I incur a hotel bill of £120 (100 net) I claim £20 from VAT input then recharge the net figure at £100+vat. Are you suggesting you charge £120+vat?

AFAIK whilst not illegal, I can see why the client might get upset. I know a lot of fellow contractors who do this as they are on flat rate VAT and they lose out by not adding VAT onto the Gross figure (cos they can't claim input VAT).

Edited by worsy on Wednesday 19th March 18:38

[rlw]

As per the last post, you should only be charging VAT on the net cost of your recharged VATable expenses/disbursements and not VAT on top of the gross cost. Obviously on non-VATable expenses, you charge VAT on the original sum.

[Eric Mc]

Why charge your customer separately for expenses at all?

I don't.