Question about expenses in a VAT registered ltd company.

[Flyfishing]

Hello. It’s nice to see this forum still going - I got lots of advice when I first started up about 10 years ago now.

I have a question about expenses.

In my company, I irregularly use a hotel which I can charge onto my client. I am new to being VAT registered. I have a couple of questions, please:

Do I charge VAT onto my onward invoice to my client? They say that they don’t do this but I have heard that it is the correct way of doing it.

If I invoice this amount, it means that I lose 19% in corporation tax. This might be the case, but is that right or, if not, is there a better way to do this?

Thanks for you help.

P.

 

[WaveJumper]

If your VAT registered yes all your invoices should be charging VAT and correctly showing your VAT number. Donts forget you are claiming back the VAT you pay and subtracting this from what you “collect” in. Make sure you keep proper records.

And has nothing to do with CT

 

[Flyfishing]

Thank you! I thought as much.

Sorry to be slow, but if my hotel is £120 including VAT then do I invoice £120 plus VAT and then claim the VAT back on the original hotel bill. This means that I claim back the £20 original VAT but I am liable for the onward £24 and out of pocket?!

My other question in relation to corporation tax was:

If I invoice the hotel at £120 plus VAT then it is not a tax deductible expense and so I am liable for corporation tax on this amount? Is this because I am able to invoice it on and so not classed as an expense?

Thanks - new to this.

 

[Newchodge]

Thank you! I thought as much.

Sorry to be slow, but if my hotel is £120 including VAT then do I invoice £120 plus VAT and then claim the VAT back on the original hotel bill. This means that I claim back the £20 original VAT but I am liable for the onward £24 and out of pocket?!

My other question in relation to corporation tax was:

If I invoice the hotel at £120 plus VAT then it is not a tax deductible expense and so I am liable for corporation tax on this amount? Is this because I am able to invoice it on and so not classed as an expense?

Thanks - new to this.

Why is it not a tax deductible expense?

You either pay the hotel £100 plus £20 VAT and charge the customer £100 plus VAT, or you add something to the £100, say £10, charge the client £110 plus £22 VAT. The VAT you pay is claimed back from HMRC. The VAT you receive is paid to HMRC. Ignore VAT for your accounting purposes, it has no effect on your profitability.

 

[Flyfishing]

Thank you! Makes perfect sense!

 

[MyAccountantOnline]

.....

Sorry to be slow, but if my hotel is £120 including VAT then do I invoice £120 plus VAT and then claim the VAT back on the original hotel bill. This means that I claim back the £20 original VAT but I am liable for the onward £24 and out of pocket?!

......

It's your choice what your charge your client/customer for hotel accomodation but the cost does need to have VAT added to it.

Are you using standard VAT accounting ie not the Flat rate scheme?

 

[MyAccountantOnline]

....

If I invoice the hotel at £120 plus VAT then it is not a tax deductible expense and so I am liable for corporation tax on this amount? Is this because I am able to invoice it on and so not classed as an expense?

Thanks - new to this.

Generally costs incurred by your company for business purposes are allowable deductions for Corporation tax. Any reason why you think the cost isn't allowable?

 

[Flyfishing]

Thanks Nicola.

I am using standard rate. I see about tax deductible expenses now!

If I invoice it then it is treated as sales but the hotel bill itself is treated as an expense. Correct?

Thanks

 

[MyAccountantOnline]

If I invoice it then it is treated as sales ..

Yes

 

[MyAccountantOnline]

.... but the hotel bill itself is treated as an expense. Correct?

If it's for yourself only whilst on a trip solely for company business purposes generally yes.

You need to bear in mind entertaining for example isn't allowable.

 

[Newchodge]

Also bear in mind that 'tax' is not a single thing. VAT is a tax that has almost nothing to do with you - you and your company are just unpaid tax collectors. A tax deductible expense is deductible against corporation tax.

 

[Flyfishing]

Thank you all! Much appreciated!