VAT disbursement - The Book-keepers Forum (UK)

sgrahams · Newbie

VAT disbursement

RobH · Expert

Hi,

I believe the correct way is that you do not make a profit on the expenses if expenses are invoiced in this way. So in the case of the hotel example you would invoice out £100 plus vat and in the situation of the train fare it would be £50 plus vat even though theer is no vat being charged to you. Other than that youinclude whatever expenses you think you are going to incur, add on a margin as profit and charge it as a complete price within your training fee.

Rob

sgrahams · Newbie

thanks RobH,

I ask as I have had conflicting answers.. one suggesting i must comply with HMRC VAT Public Notice 700 Section 25.1: disbursements, but i cannot get my head around HMRC VAT Public Notice 700 Section 25.1: disbursements, and was hoping someone on this forum could clarify?

Sincerely

-- Edited by sgrahams on Tuesday 27th of April 2010 04:39:01 PM

RuthA · Senior Member

I don't think the expenses you descrice would be classified as disbursements for VAT purposes.

To qualify as a disbursement several conditions must be met, including:

'your client actually received and used the goods or services provided by the third party (this condition usually prevents the agents own travelling and subsistence expenses, telephone bills, postage, and other costs being treated as disbursements for VAT purposes)'

So if they are not disbursements, then it comes down to charging an amount and adding VAT, as usual.

-- Edited by RuthA on Tuesday 27th of April 2010 05:06:36 PM

sgrahams · Newbie

Thank you RuthA..

clarifying the following for me would be appreciated;

AAA asks ME to train BBB (BBB believes I work for AAA), who is the client and who is the third-party?

When u say, 'then it comes down to charging an amount and adding VAT, as usual.'
if I pay a hotel per night £117.50 inc VAT; do I invoice AAA £100, and claim the VAT (£17.50) back from VAT ( I cannot as I am flat rate VAT), or do i ask AAA to claim the VAT back?

I ask because others companies we work for ask we invoice Gross whereas AAA ask we invoice expenses Nett?

Sincerely,

-- Edited by sgrahams on Tuesday 27th of April 2010 06:10:41 PM

-- Edited by sgrahams on Tuesday 27th of April 2010 06:12:12 PM

RuthA · Senior Member

The client is the person you invoice ie AAA.

You are the agent.

The third party is the hotel.

What I meant was that if it's not being treated as a disbursement, then it's down to you and your client - AAA - to negotiate your terms.

It's going to come down to what is acceptable to you both.

The idea behind the flat rate scheme is that since you pay HMRC less than 17.5%, you are effectively claiming back VAT paid, although in practise you will be slightly over or slightly under paying, compared to if you weren't flat rate.

Is it worth considering moving off the flat rate scheme? Would it cause you much extra work, would it be worth while? It may be something to consider if you are concerned that you will be losing out with the flat rate scheme.