VAT on expenses for Canadian company?

[cheeky44]

Hello,

We've done some work for a canadian company. I've charged the canadian company for services without VAT as I've looked up Notice 741 and the place of supply is Canada and therefore outside the scope of VAT.

I've got myself a bit confused (and HMRC haven't helped) with regards to charging VAT on expenses to this canadian company.
Some of the expenses are recharges eg flights and accommodation from when we visited them, and then there are some expenses we have incurred on their behalf which I would consider disbursements eg web hosting.

Generally recharges are charged with VAT because they are supplied in the course of providing a service and incurred by us not the client, but because the service we have provided is not VAT'able does this make these recharges not VAT'able?

For whether the web hosting would be VAT'able HMRC advised me to look up Notice 741 with regards to 'use and enjoyment' because if the user is in the UK then it is VAT'able.

Would I get in trouble with HMRC for treating a disbursement as a recharge?

Thank you in advance.

[Anna Chandley]

Hello

There should be no VAT charged on the recharged expenses because these form part of the fee for your supply of services. Setting your fee at £x plus expenses is no different to setting a higher fee which is inclusive of expenses.

With disbursements which qualify as VAT disbursements you have a choice

1. Treat them as a disbursement and do not charge VAT

2. Treat them as a normal supply and charge at the appropriate VAT rate.

In your case it may be that the supply of the website is a separate supply to your services and if supplied in the UK you may need to charge UK VAT. If this is the case then it would be better to treat the website cost as a disbursement.

Rules on VAT disbursements can be checked on HMRC website) http://www.hmrc.gov.uk/vat/managing/charging/disbursements.htm

Anna

[cheeky44]

Thank you for your crystal clear answer, much better than the HMRC!

We have ensured that we meet the 8 conditions for making it a disbursement and charged accordingly.

Many thanks