charging vat twice or?

Do you charge out materials at cost?

In that case, you should only put down their cost before VAT, as that is the actual cost to you. And then add VAT at the end. If you are putting down the cost including VAt, and then adding VAt to that, well you aren't exactly charging VAT twice but you are charging your client more than cost price.

i.e materials cost you 100+VAt = 120.

You are charging client 120+VAT = 144

wheras you should be charging them the 100+VAt.

However, unless this is something you agreed with the client, you are under no obligation to only pass on materials at cost. You are currently making a profit on the supply of materials. Is that a problem?

Radsteral wrote: »

i see, then the problem lies with me . i did the breakdown on the invoice, so the same invoice that goes to client, goes to the accountant, and she wants a breakdown like this, for vat purposes every 3 months and for tax purposes too as if i work for companies, she need to know the tax the companies withhold from the actuall invoice and tax only calculated from labour cost..
thanks , next time i ll probably have to send a seperate invoice to the client and a seperate invoice for tax purposes .
and yes price agreed is 4000 plus vat , so thats what it was agreed- i m not ripping her off

Seriously, you need to speak to your accountant about this, I can't quite make head or tail of the above and you clearly don't understand how VAT works. You certainly CANNOT raise two different invoices for the same thing, one for the client and one for 'tax purposes'.

If your agreed price was £4000+VAT then that's what you charge. There is no need to break this down further if you don't want to, it makes no difference whatsoever to your client. As long as there is the VAT figure shown clearly. Also, if you haven't agreed to charge materials out at cost, then put whatever you like for the materials cost, plus VAT. You aren't charging them VAT twice.

'She need to know the tax the companies withhold from the actuall invoice' - this doesn't make any sense at all. Companies have to pay the VAT on invoices and then look after their own VAT returns. What another company is doing is not relevant. You can't 'withold tax' from an invoice - do you mean not pay that part of the invoice, or not include it on the invoice?

Seriously, talk to your accountant. But anyway, your invoice should have been for £4000+VAT = £4800, clearly showing that £800 of that is VAT.

Unless the client sees the invoice from the supplier there should be no problem. The problem is if you are stating "materials at cost" in your contracts and then charging them the supplier vat inclusive price then adding vat on top. Your accountant only needs to see the invoice to your client and the invoice from your supplier which is what you should be giving them anyway. When you have your car fixed at a garage you will see parts, labour and vat. The price quoted for parts is normally rrp excluding vat and not cost .

JasonLVC wrote: »

The customer is not correct.

Does the customer go into Tesco, buy a pair of jeans and then demand that the VAT relating transportation costs, shop overhead, and material costs be deducted from the eventual selling price becuase "they're being charged twice"?

The OP buys materials in and pays VAT on those materials. The OP can choose, if they want to, to charge those materials onto the customer at cost (ie, the ex VAT price as OP can reclaim the VAT) or not at cost, it will depend upon the contract.

OP has stated they agree a price of £4k + VAT so it makes no difference what the cost of materials, labour or profit margin is, customer agreed £4k + VAT and that is the price they must pay.

The customer could always insist on supplying their own materials if they want to - but then they wouldn't get the discount from the builders merchant that the OP can get and so it is swings and roundabouts.

But when you go into Tesco they do not show their original invoice so you never know their mark up.

As the OP includes the original invoice the customer can see what has been paid and that the OP has marked it up. Say the materials are £1000 + £200 VAT = £1200, OP then invoices for £1200 + £240 VAT = £1440 so I can see the customer's point. Their are two lots of VAT but the customer can only claim £240. The OP has paid the builders merchant so can reclaim the VAT element of that - £200.

They are not being charged materials at cost so I think the customer is right to query this.

martindow wrote: »

But when you go into Tesco they do not show their original invoice so you never know their mark up.

As the OP includes the original invoice the customer can see what has been paid and that the OP has marked it up. The OP has paid the builders merchant so can reclaim the VAT element of that - £200.

They are not being charged materials at cost so I think the customer is right to query this.

I take your point, but unless the OP is a charity, then I assume there is an element of markup (or else OP will fail to make a profit). That the OP is clearly showing their mark up is a bit daft I agree.

The customer cannot reclaim any VAT, the £240 as per your example. If the customer could reclaim the £240 what's the problem?

If the customer cannot reclaim the £240 then the OP could, if they choose to do so, recharge the materials at cost+mark up+VAT.

Taking your example:

Materials are £1000 + £200 VAT = £1200 to builders merchant.
OP reclaims the £200 VAT and so is out of pocket by £1,000

If OP recharges at cost, they would charge £1000 + £200 VAT.

If OP adds a margin, of say £200, then invoices will be £1,000 (cost) + £200 (margin) + £240 VAT = £1440

The customer is not paying VAT on top of VAT, the customer is paying VAT on the materials plus VAT on the additional margin. That's the "Value Added" part of VAT.

The overall difference between "at cost" and "with profit" is £40 of VAT. The extra £40 is down to the added margin.

The margin is irrelevant because the customer agreed a fixed price of £4000+VAT and so whatever the margin built into that quote for materials, labour, travel expenses or whatever doesn't matter as the customer is being charged the price they agreed.

The customer cannot argue over the margin/profit the OP is making on the job after agreeing the contract price.