The madness of the VAT merry-go-round

[Olf]

If I charge a client some expenses which have a VAT element in them e.g. a meal, who re-claims the VAT on those receipts given that I add VAT to the gross expense bill incurred at a flat 17.5%?

It's so bloody confusing this stuff. I could spend hours talking to my accountant about it and still have hundreds of q's left.

[Fly Boy]

You do, you need the original reciept too.
You invoice your client & he claims the VAT back from your invoice etc.

Good innit

[Plotloss]

You charge the same VAT that the restaurant charged you, surely?

So you just pass the nett expense through, and add the VAT.

You claim against the restaurant 'invoice', he claims against your invoice.

IANAA however.

[Olf]

Plotloss said:

You charge the same VAT that the restaurant charged you, surely?

So you just pass the nett expense through, and add the VAT.

You claim against the restaurant 'invoice', he claims against your invoice.

IANAA however.

Well, herein lies the dilema. Apparently not... I'll dig up a previous on this... wait one.

[Eric Mc]

Plotloss said:

You charge the same VAT that the restaurant charged you, surely?

So you just pass the nett expense through, and add the VAT.

You claim against the restaurant 'invoice', he claims against your invoice.

IANAA however.

Not really.

For a start, if you are running your own business, the concept of "charging expenses" to your cutsomer is not really what running a business is all about. What you do is charge your customer what you think is the correct fee required to cover the work you have done for them, the cost of goods sold to them (if appropriate) and the recovery of your business overheads (including expenses). It is up to you to decide how much profit margin you incorporate into those elements of your invoices that relate to recovery of costs.

VAT very much folows these principles.

But be aware, if you are a VAT registered trader, you must charge the appropriate rate of VAT YOU ARE OBLIGED to charge on your goods and services, not the rate of VAT that may have been charged to you when you bought a particular item or incurred a particular cost or expense.

A classic example is "rail fares". Rail fares are exempt from VAT and you therefore will not be charged any VAT when you buy your train tickets. However, if you are recharging rail costs to your custromer, if you are VAT registered, YOU must charge VAT on your bill.

Edited by Eric Mc on Tuesday 29th July 16:36

[Plotloss]

Entirely logical explanation of what is, on the face of it, an illogical proposition.

Thanks Eric.

[Olf]

Eric Mc said:

Plotloss said:

You charge the same VAT that the restaurant charged you, surely?

So you just pass the nett expense through, and add the VAT.

You claim against the restaurant 'invoice', he claims against your invoice.

IANAA however.

Not really.

For a start, if you are running your own business, the concept of "charging expenses" to your cutsomer is not really what running a business is all about. What you do is charge your customer what you think is the correct fee required to cover the work you have done for them, the cost of goods sold to them (if appropriate) and the recovery of your business overheads (including expenses). It is up to you to decide how much profit margin you incorporate into those elements of your invoices that relate to recovery of costs.

VAT very much folows these principles.

But be aware, if you are a VAT registered trader, you must charge the appropraite rate of VAT YOUARE OBLIGED to charge on your goods and services, not the rate of VAT that may have been charged to you when you bought a particular item or incurred a particular cost or expense.

A classic example is "rail fares". Rail fares are exempt from VAT and you therefore will not be charged any VAT when you buy your train tickets. However, if you are recharging rail costs to your custromer, if you are VAT registered, YOU must charge VAT on your bill.

That's what I understood. Lets say for the point of this discussion that the company is on an open book contract where there is no profit on direct expenses
incurred by my co and they must be charged at cost with evidence.

Edited by Olf on Tuesday 29th July 16:40

[HRG]

Plotloss said:

Entirely logical explanation of what is, on the face of it, an illogical proposition.

Thanks Eric.

I never realised Spock was your father...

[Olf]

Plotloss said:

Entirely logical explanation of what is, on the face of it, an illogical proposition.

Thanks Eric.

It foxed me first time round as well.

[Eric Mc]

Olf said:

Eric Mc said:

Plotloss said:

You charge the same VAT that the restaurant charged you, surely?

So you just pass the nett expense through, and add the VAT.

You claim against the restaurant 'invoice', he claims against your invoice.

IANAA however.

Not really.

For a start, if you are running your own business, the concept of "charging expenses" to your cutsomer is not really what running a business is all about. What you do is charge your customer what you think is the correct fee required to cover the work you have done for them, the cost of goods sold to them (if appropriate) and the recovery of your business overheads (including expenses). It is up to you to decide how much profit margin you incorporate into those elements of your invoices that relate to recovery of costs.

VAT very much folows these principles.

But be aware, if you are a VAT registered trader, you must charge the appropraite rate of VAT YOUARE OBLIGED to charge on your goods and services, not the rate of VAT that may have been charged to you when you bought a particular item or incurred a particular cost or expense.

A classic example is "rail fares". Rail fares are exempt from VAT and you therefore will not be charged any VAT when you buy your train tickets. However, if you are recharging rail costs to your custromer, if you are VAT registered, YOU must charge VAT on your bill.

That's what I understood. Lets say for the point of this discussion that the company is on an open book contract where there is no profit on direct expenses
incurred by my co and they must be charged at cost with evidence.

Edited by Olf on Tuesday 29th July 16:40

A always think that if the customer is making these sorts of demands on its contractors, then, in their mind's eye, the contractors are "mere" employees - and you could be opening yourself to IR35 problems. Do they insist that other companies and businesses they deal with must supply evidence of "expenses" they are rebilling? I bet they don't.

I do hope they are not asking you for original vouchers or receipts regarding these expenses. They must be retained by YOU as they are YOUR proof for tax and VAT purposes. At best, supply them with copies.

Edited by Eric Mc on Tuesday 29th July 16:56