VAT on Travel Expenses - LTD Co

MasterPoo

Hi,

I'm just wondering, about this. I'm a self employed contractor/Consultant (LTD Co.), VAT Registered.

I work for X at one of their clients in Northampton.

The Client (My Clients Client) now requires me to travel fortnightly, this will soon increase to 1 x a week to London.

My Client have asked that I Invoice them for travelling costs.

My Question: Do I charge VAT on these travelling costs (I have all receipts)?

Many thanks

notanewuser

MasterPoo wrote: »

Hi,

I'm just wondering, about this. I'm a self employed contractor/Consultant (LTD Co.), VAT Registered.

I work for X at one of their clients in Northampton.

The Client (My Clients Client) now requires me to travel fortnightly, this will soon increase to weekly to London.

My Client have asked that I Invoice them for travelling costs.

My Question: Do I charge VAT on these travelling costs (I have all receipts)?

Many thanks

Yes. (message too short)

MasterPoo

notanewuser wrote: »

Yes. (message too short)

Thank you, what do you mean "message too short"?

notanewuser

MasterPoo wrote: »

Thank you, what do you mean "message too short"?

The forum won't let you post fewer than 10 characters. "Yes." was only 4.

TheCyclingProgrammer

Yes, you do. Make sure you've agreed with the client how your costs will be passed on to them - will you be re-charging your costs net of VAT or inclusive of VAT (whichever you choose, you must then charge VAT on top)?

If you're on the standard VAT scheme then the simplest thing is to re-bill the net cost to the client + VAT - the entire chain is VAT neutral and you fully recover your costs. Example: hotel bill of £100 + VAT = £120. You recover the £20 VAT from the VAT man so cost to your business is £100. You re-bill £100 to your client, and charge VAT on top of this.

If you're on the flat-rate scheme however, you can't recover the VAT so in the above example, the total cost to your business is £120. If your client has agreed that you can re-charge your costs in full, then technically you should be charging them £120 + VAT. However some clients don't like this as they see it as charging VAT on VAT. But you're not, you're charging VAT on top of your service fee which includes a £120 re-charge for costs incurred. So make sure this is clear in your contract if unsure.

If your client insists on you re-billing costs net of the original input VAT when you're on the FRS then you won't be fully recovering your costs but remember one of the ideas behind the FRS is that the surplus (the difference between the VAT you charge and the VAT you pay HMRC at your FRS percentage) is designed to cover these kinds of additional costs. And you're still better off than somebody whose client doesn't reimburse any expenses at all!

Likewise, if you incur costs that are zero-rated (train tickets for example) or exempt, or charged at a reduced rate of VAT, you must still charge VAT at the standard rate when you re-bill these costs.

antrobus

The answer isn't 'yes'. And it isn't 'no' either. The answer is that it depends on whether these expenses are disbursements or recharges.

Here's the official HMRC explanation
https://www.gov.uk/vat-costs-or-disbursements-passed-to-customers

TheCyclingProgrammer

antrobus wrote: »

The answer isn't 'yes'. And it isn't 'no' either. The answer is that it depends on whether these expenses are disbursements or recharges.

Here's the official HMRC explanation
https://www.gov.uk/vat-costs-or-disbursements-passed-to-customers

In OPs case, the answer is 'yes'.

OP mentioned travel expenses so its safe to say they aren't disbursements. And for most contractor/consultant type businesses who re-charge their typical daily costs (travel, subsistence, accommodation etc.) will not be disbursements.

Disbursements are generally only something you need to think about if you're buying things on behalf of your client, which will be owned by them and is for their own use. An IT consultant might, for example, purchase a domain name or web hosting package in their client's name and then pass these costs on to the client as a disbursement.

Another common example is conveyancers who pay land registry and local fees on behalf of their clients - these are also disbursements.

Pennywise

antrobus wrote: »

The answer isn't 'yes'. And it isn't 'no' either. The answer is that it depends on whether these expenses are disbursements or recharges.

Here's the official HMRC explanation
https://www.gov.uk/vat-costs-or-disbursements-passed-to-customers

But that link says:-

"There are many incidental costs your business might incur that must be included in VAT calculations when you invoice customers. These include items like travelling expenses"

So in this case, the answer is almost certainly Yes