VAT on Mileage, How to charge on?

[VEX]

Morning PH collective.

I am contracting to a company, invoicing through my own company, and had been submitting my expenses directly to them.

There accountant has come back and said that as I am not on the payroll I need to submit my expenses through my business and charge them VAT.

I know the VAT on mileage is different to standard VAT and my mileage spreadsheet calculates that, but as one business to the other do I invoice them at the mileage vat rate or at the standard rate and claim the mileage rate through my normal expenses?

[groomi]

My company invoice the agreed mileage rate (for example 40p per mile) and do not add/show VAT on the invoice. When I then claim my expenses from my company, the company reclaims the VAT at 11p per mile, which the client presumably does at their end too.

[Eric Mc]

You are not an employee (that is the whole point of your current set up) so you do not "claim" expenses from the people you work for anymore.

You are running a business and you therefore charge your customer for the services you provide. Therefore you should raise an invoice for EVERYTHING you want to recoup from your customers - including recoupment of your travel costs. Whether you feel you need to show these travel costs as a seperate invoice or as a seperate element to your normal invoice is between you and your customer. There is no legal requirement to show a breakdown on your sales invoices of the costs you are trying to recover.

You should charge VAT on the FULL VALUE of the invoices you raise. For example, if you are raising a bill to your customer for £1,000.00 fees plus £50.00 expenses recovery - VAT should be charged on the full value of the invoice i.e. £1,050 @17.5% = £183.75 (VAT Inclusive invoice £1,233.75).

Regarding recovering Input VAT on your mileage costs, HMRC allow you to recover the VAT in the "Fuel" element of the 40p per mile claim you are making which they reckon to be 11p VAT Inclusive. In other words, on the 40p per mile you charge your customer, you can reclaim £0.02 (11p x 117.5/100)
You MUST keep original fuel vouchers to provide paper backup to the Input VAT claims on petrol.

[VEX]

Great, Thanks.

I thought that was the case, but the client wanted me to claim the original VAT level (Based on the 2p to the 11p Eric quoted)

I will have to go back to them and tell them how it is.

I know I need to keep VAT receipts for my claims, but the Client expressed suprise when I told him that he had to. I don't rate their accountant much either.

Thanks again.

VEX.