Expenses + VAT?????

[downsouth]

If i claim expenses from a client for travel, hotels, taxis etc, should I also claim for VAT on top of the actual expensed value. I am VAT registered.

Hotel actual cost £100, my expenses to client £100 + vat (£115)

I do actually only at present claim the actual costs but a question arose at work recently whereby you 'should' also charge VAT on top of the expenses????

[sheelagh]

Yes, you should add VAT. The additional costs are part of the cost of delivering your services.
You can claim back the VAT you paid to the hotel and you should add VAT to the amount you charge your client. The amount you charge your client is decided between you and the client - it might be the exact cost incurred, or it might be an agreed sum.
The only time you would not add VAT is if the "expenses" swere dispersements.

see here

http://www.hmrc.gov.uk/vat/managing/...bursements.htm

[David Griffiths]

Is the hotel bill to you £100 including VAT? In that case, depending on youre agreement with the client, should you not be charging the actual cost to you of the net amount? If you charge £100 plus VAT you are making a profit on it.

Either way, the invoice to the client must have VAT charged on all elements.

[downsouth]

the hotel bill of £100 is inclusive of VAT. I agree on charging the client £100 + VAT makes this appear like i'm making a profit, so some clarity on what I should bill the end client is whats required.

Should I simply charge £86.96 + Vat (£13.04) = £100

what about items like taxi's, where there is no visibility of any VAT element, say taxi fare is £30 what should I charge the client? £30+vat???? that doesn't look right to me

[Jenni384]

Originally Posted by downsouth

what about items like taxi's, where there is no visibility of any VAT element, say taxi fare is £30 what should I charge the client? £30+vat???? that doesn't look right to me

As David says, you have to charge VAT on all elements, unless they are disbursements (which can get complicated but, in short, as you used the taxi and not the client, it can't be a disbursement).

IIRC, last time I looked at disbursements, (which I admit was a number of years ago!), I seem to recall that you have to add VAT to the gross, thus making a 'profit' on it for both you and the VAT man.

[Mattonella Tile Studio]

At the end of the day, if a taxi costs £30, you need to bill your client £30 + VAT to cover your costs. VAT man is having his bit anyway, so if you add £30 to the clients bill, you're only getting to keep about £26, making you out of pocket.

[Kevin Hall]

As Jenni says, because you both paid for and enjoyed the hotel room (or the taxi ride), it's not an expense belonging to the client and therefore cannot be a disbursement, according to HMRC's own guidance on this:



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.

So what do you do?

Well, let's say the hotel charges £100 net and adds £15 VAT (assuming it's not an overseas hotel, in which case reclaiming the VAT charged to you is possible but more awkward and so some businesses don't bother with it - which would change the comments I am about to make).

The purchase invoice is for £115 and you pay £115 from you cash book. However, if your business then reclaims the £15 VAT (e.g. assuming you are, for example, an employee of the business), your business has only suffered a net expense of £100.

You would then recharge the £100 expense to your client (assuming they have agreed to meet your actual expenses and your business cannot make a profit from this), adding VAT at 15%.

However, if your business is not reclaiming the VAT on the hotel expense, then your business would have to recharge £115 to the client and add VAT at 15% on that gross figure (i.e. £132.25 in total).

Hope that helps?

[downsouth]

Thanks All, sure cleared a few VAT issues up and will make excellent conversation at the clients site tomorrow

Thanks again

[stphnstevey]

Didn't think the client will like it if you are charging VAT on VAT (ie charge VAT on an expense were you have been charged VAT).

Therefore I thought you charge the client the net amount (or full amount if no VAT) and then charge VAT on that, as the expense was incured in delivering delivering a service.

For expenses were you don't incur VAT (eg train tickets), you actually make a small profit.

Is it ok to charge VAT on reimbursed mileage rates for using your personal car (ie 40p/25p a mile?)?

[weebly_one]

Originally Posted by stphnstevey

Is it ok to charge VAT on reimbursed mileage rates for using your personal car (ie 40p/25p a mile?)?

Personally I do charge VAT on reimbursed mileage - and I have never had a query about doing that - let me know if I am doing this wrong though.

Another question - what should you do if you are recharging the actual cost of postage - as postage is a zero rated supply?