VAT on expenses

[cap28]

I work in recruitment and have just started placing temporary contractors with clients and am unsure about how to invoice for expenses.

If I have a contractor on site for 1 week at £200 a day, he drives to the train station 4 miles a day at 50p a mile (£10 a week) and then travels by train to site at a cost of £100 for a weekly ticket (VAT exempt) that can claimed from the employer.

Labour = £1000
Petrol = £10
Rail travel = £100
Total = £1110
VAT = £194.25
Total in VAT = 1304.25

Or

Labour = £1000
Petrol = £10
VAT = £176.75
Total = £1186.75
Rail travel = £100
Total = £1286.75

or

Labour = £1000
VAT = £175
Total = £1175
Rail travel and travel = £110
Total + exp = £1285

Do I charge VAT back to customers at the 17.5% for everything or does it change depending on the VAT rating of the item?

Thanks

[elainec100@cheapaccounting]

What have you included in the T&Cs with your clients - do they pay for expenses or do you foot the bill?

[cap28]

They pay all expenses, what I need to know is if I charge VAT on items that have already had VAT paid on them or are VAT exempt.

[Philip Hoyle]

VAT is charged on everything. Your first example is correct.

[Jaydee]

Originally Posted by Philip Hoyle

VAT is charged on everything

Perhaps this is not so in the "simple" tax that is VAT!

The OP should refer to Business Brief 10/04 which states that even agencies which contract directly with workseekers (making them principals) could act from a VAT perspective as though they were agents - meaning that they should only charge VAT on their profit - not the full invoice value.

Of course this assumes that the contractor is not on the OP's payroll - in which case the agency would be a principal and then charge VAT on the invoice value.