VAT on travel expenses to client
Discussion
I’m new to this running a business thing and on a recent trip to Barcelona to speak for a client (I do public speaking and consulting), I learned that I should charge BAT to the client on my flight, taxi etc. i double checked this on a tax advisory website… the client has come back saying that:
we’ve consulted with our tax advisors regarding the VAT applied to the flights, and as far as we understand, VAT on flight expenses can be applied to a private individual, but not to a company invoice.
What’s the correct approach? Thanks!
we’ve consulted with our tax advisors regarding the VAT applied to the flights, and as far as we understand, VAT on flight expenses can be applied to a private individual, but not to a company invoice.
What’s the correct approach? Thanks!
https://www.gov.uk/guidance/vat-costs-or-disbursem...
Some examples of costs that could be recharges but are not disbursements include:
an airline ticket that you buy to visit a client or to travel to a job, if you recharge the cost to your client you must charge VAT because the flight was for you, not for the client
Some examples of costs that could be recharges but are not disbursements include:
an airline ticket that you buy to visit a client or to travel to a job, if you recharge the cost to your client you must charge VAT because the flight was for you, not for the client
Eric Mc said:
The VAT assumption is that a business charges its customers for the services or goods it is supplying to its customer. Therefore, most of the, whatever you decide is the right amount to charge the client/customer you should add VAT to it.
Eric is the expert in this conversation.At the end of the day, it really only matters if the business paying the invoice is not a VAT registered business.
Thank you both, much appreciated. The business is registered in Spain, but large enough that an additional £40 on travel costs shouldn’t make any difference. I am careful about every £ or € I spend or charge and expect them to be as well, but in the scheme of things it’s no difference. I was surprised when they pushed back innit and then also confirmed their accountant people had said they same.
Access to such expertise is brilliant- thank you.
Access to such expertise is brilliant- thank you.
E-numbers said:
I m new to this running a business thing
If it helps....Half my business is international; public and government institutional work either directly for those institutions or intermediary businesses working on their behalf.
Billing almost always involves three simple charge headings: Fees, Per-diem (an amount per night of stay to cover in-country expenses such as hotels, meals, etc, and Travel (flights, airport parking, etc).
Unless explicitly requested, I don't provide a line-by-line breakdown of expenses. I am sometimes asked to provide a scan of boarding passes to prove I visited the country.
It's good practice to do this if you can because it gives you the ability to add a margin to your expenses. When you're charging only fees, you're reliant on the number of days you can sell which is of course, limited. So adding margin to costs is a way to increase you revenue.... or give you a little flexibility if needed.
For example, if you agree a flight allowance of £500 with a client, you could either choose to fly with a low-cost airline at a cost of £100, thus making you an additional £400 on that job... or go the other way if you fancy it and fly Club Europe on BA at a cost of £650. Same with the Per Diem. Either way, the client pays the agreed rate.
Don't think that you're ripping off your customer doing this. Providing the agreed costs are reasonable, the client will not care a jot and keep in mind the fact that you will need to spend 'admin' time making the bookings and sorting the logistics of travel; time that is not always easy or possible to charge but can be covered using this approach.
Also makes the process of billing much easier.
E-numbers said:
Thank you both, much appreciated. The business is registered in Spain.
That's really critical bit of information. As Sheepshanks says, Reverse Charge is what is required here IMO. It is the buyer who accounts for both input and output and therefore you don't charge VAT.StevieBee said:
If it helps....
Half my business is international; public and government institutional work either directly for those institutions or intermediary businesses working on their behalf.
Billing almost always involves three simple charge headings: Fees, Per-diem (an amount per night of stay to cover in-country expenses such as hotels, meals, etc, and Travel (flights, airport parking, etc).
Unless explicitly requested, I don't provide a line-by-line breakdown of expenses. I am sometimes asked to provide a scan of boarding passes to prove I visited the country.
It's good practice to do this if you can because it gives you the ability to add a margin to your expenses. When you're charging only fees, you're reliant on the number of days you can sell which is of course, limited. So adding margin to costs is a way to increase you revenue.... or give you a little flexibility if needed.
For example, if you agree a flight allowance of £500 with a client, you could either choose to fly with a low-cost airline at a cost of £100, thus making you an additional £400 on that job... or go the other way if you fancy it and fly Club Europe on BA at a cost of £650. Same with the Per Diem. Either way, the client pays the agreed rate.
Don't think that you're ripping off your customer doing this. Providing the agreed costs are reasonable, the client will not care a jot and keep in mind the fact that you will need to spend 'admin' time making the bookings and sorting the logistics of travel; time that is not always easy or possible to charge but can be covered using this approach.
Also makes the process of billing much easier.
Most of our work is international and we charge a day rate but make a point of charging expenses at cost. To me it doesnt sit right charging extra for something which is so easily checked. If a staff member or sub contractor did that to me they would be straight out of the door.Half my business is international; public and government institutional work either directly for those institutions or intermediary businesses working on their behalf.
Billing almost always involves three simple charge headings: Fees, Per-diem (an amount per night of stay to cover in-country expenses such as hotels, meals, etc, and Travel (flights, airport parking, etc).
Unless explicitly requested, I don't provide a line-by-line breakdown of expenses. I am sometimes asked to provide a scan of boarding passes to prove I visited the country.
It's good practice to do this if you can because it gives you the ability to add a margin to your expenses. When you're charging only fees, you're reliant on the number of days you can sell which is of course, limited. So adding margin to costs is a way to increase you revenue.... or give you a little flexibility if needed.
For example, if you agree a flight allowance of £500 with a client, you could either choose to fly with a low-cost airline at a cost of £100, thus making you an additional £400 on that job... or go the other way if you fancy it and fly Club Europe on BA at a cost of £650. Same with the Per Diem. Either way, the client pays the agreed rate.
Don't think that you're ripping off your customer doing this. Providing the agreed costs are reasonable, the client will not care a jot and keep in mind the fact that you will need to spend 'admin' time making the bookings and sorting the logistics of travel; time that is not always easy or possible to charge but can be covered using this approach.
Also makes the process of billing much easier.
NorthDave said:
StevieBee said:
If it helps....
Half my business is international; public and government institutional work either directly for those institutions or intermediary businesses working on their behalf.
Billing almost always involves three simple charge headings: Fees, Per-diem (an amount per night of stay to cover in-country expenses such as hotels, meals, etc, and Travel (flights, airport parking, etc).
Unless explicitly requested, I don't provide a line-by-line breakdown of expenses. I am sometimes asked to provide a scan of boarding passes to prove I visited the country.
It's good practice to do this if you can because it gives you the ability to add a margin to your expenses. When you're charging only fees, you're reliant on the number of days you can sell which is of course, limited. So adding margin to costs is a way to increase you revenue.... or give you a little flexibility if needed.
For example, if you agree a flight allowance of £500 with a client, you could either choose to fly with a low-cost airline at a cost of £100, thus making you an additional £400 on that job... or go the other way if you fancy it and fly Club Europe on BA at a cost of £650. Same with the Per Diem. Either way, the client pays the agreed rate.
Don't think that you're ripping off your customer doing this. Providing the agreed costs are reasonable, the client will not care a jot and keep in mind the fact that you will need to spend 'admin' time making the bookings and sorting the logistics of travel; time that is not always easy or possible to charge but can be covered using this approach.
Also makes the process of billing much easier.
Most of our work is international and we charge a day rate but make a point of charging expenses at cost. To me it doesnt sit right charging extra for something which is so easily checked. If a staff member or sub contractor did that to me they would be straight out of the door.Half my business is international; public and government institutional work either directly for those institutions or intermediary businesses working on their behalf.
Billing almost always involves three simple charge headings: Fees, Per-diem (an amount per night of stay to cover in-country expenses such as hotels, meals, etc, and Travel (flights, airport parking, etc).
Unless explicitly requested, I don't provide a line-by-line breakdown of expenses. I am sometimes asked to provide a scan of boarding passes to prove I visited the country.
It's good practice to do this if you can because it gives you the ability to add a margin to your expenses. When you're charging only fees, you're reliant on the number of days you can sell which is of course, limited. So adding margin to costs is a way to increase you revenue.... or give you a little flexibility if needed.
For example, if you agree a flight allowance of £500 with a client, you could either choose to fly with a low-cost airline at a cost of £100, thus making you an additional £400 on that job... or go the other way if you fancy it and fly Club Europe on BA at a cost of £650. Same with the Per Diem. Either way, the client pays the agreed rate.
Don't think that you're ripping off your customer doing this. Providing the agreed costs are reasonable, the client will not care a jot and keep in mind the fact that you will need to spend 'admin' time making the bookings and sorting the logistics of travel; time that is not always easy or possible to charge but can be covered using this approach.
Also makes the process of billing much easier.
Key is transparency. Our clients fully understand the approach so no-one is trying to pull a fast one. Quite often it's the client that sets the travel allowances and on some projects, it's insufficient but generous on others. Over time, you get to balance things out.
The other option which I prefer which is either offered by the client or proposed by us, are the lump-sum projects. This is where you have a total budget for the whole project and is up to the provider to determine how that budget is spent.
All my clients are Public Sector or projects where the Public Sector are the beneficiaries. In these scenarios, what's most important is budget management; determining the money needed at the outset because requesting additional money mid-project is simply not possible. These projects comprise teams from all over the world (one recent project in Cyprus had two Brits, two Bulgarians, a Romanias, an Estonian and an Aussie working on it) so is better to establish the travel expense budget in the Terms of Reference and leave to the consultants to determine if that's enough for them to work on the project or not. And if some benefit from a generous allowance, then that's fine.
ETA....
The other thing to consider is that travel isn't just about the hard-cost. When you're providing a service based on time spent, it's necessary (or wise) to consider the process of travel and the time spent getting somewhere. So for me, it takes around 1.5 hours from my front door to the check in desk at LHR. Add to that the usual two hour wait airside and that's nearly half a day gone and I've not yet left the country. Double that for same coming back plus the time in the air, taxi and hotel check in, etc and even a short-haul European trip can loose you two full days. The only reason you're going is for work so theoretically, those two days should be chargeable on top of the flight cost but not all contracts allow for this so adding a margin to the costs is a viable way to claw some, if not all of it, back.
Edited by StevieBee on Wednesday 8th October 15:28
And a follow up… sorry.
I provided in person consulting/advisory services to my (Spanish registered) client company, in Spain. Do I charge VAT on the services or do they come under the reverse charge thing too? They had only called out the VAT I added to travel costs, but is it the case that a service provided in the EU doesn’t have VAT added either?
I provided in person consulting/advisory services to my (Spanish registered) client company, in Spain. Do I charge VAT on the services or do they come under the reverse charge thing too? They had only called out the VAT I added to travel costs, but is it the case that a service provided in the EU doesn’t have VAT added either?
E-numbers said:
And a follow up sorry.
I provided in person consulting/advisory services to my (Spanish registered) client company, in Spain. Do I charge VAT on the services or do they come under the reverse charge thing too? They had only called out the VAT I added to travel costs, but is it the case that a service provided in the EU doesn t have VAT added either?
It all comes down to something called 'Place of Supply'. I provided in person consulting/advisory services to my (Spanish registered) client company, in Spain. Do I charge VAT on the services or do they come under the reverse charge thing too? They had only called out the VAT I added to travel costs, but is it the case that a service provided in the EU doesn t have VAT added either?
If you're in the UK and supply your services from the UK then UK VAT rules apply and you charge that to your client.
If you're in the UK but your place of supply is in Spain (or any other EU country), then you don't charge VAT.
Sounds simple enough but determining the Place of Supply becomes tricky when you're supplying services. This is because you could determine that the majority of work is done in the UK but service delivery was carried out in Spain. But what if you delivered your consultancy online? Service delivery would still be in Spain but you're still in the UK? Even HMRC admits this is complicated!
We have the odd scenario where our clients are in one country (mostly the EU) but the work they pay us to do is done somewhere else not in the EU. Our approach is to bill for services and travel (and other expenses) separately.
But as mentioned, you really need to get your Accountant to tell you what to do.
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