VAT applicable to monthly allowance +transport fees ?

VAT applicable to monthly allowance +transport...

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Hi there,

I am a consultant with VAT registered limited company. In addition to my consultancy fees where VAT is applicable (as stipulated in the contract). The client also pays me a monthly  flat rate allowance to cover my expenses (sort of cumulative per diem) and reimburses other expenses like travel.

1-    Should I add VAT to this monthly flat rate allowance while invoicing it; even though the contract do not stipulate the monthly amount + VAT (as it was the case of my consultancy fees)

2-    Same for my plane ticket that costed to me 700 pounds, do I have to add VAT in order to be reimbursed 700 +20%=840 pounds even though I paid only 700 pounds ????

 
I am confused…as my personal accountant is saying something and my client accountant is saying something different.
 
Thanks for your help

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By Cloudcounter
19th May 2011 23:22

Chargeable

The flat rate allowance is chargeable to VAT.  That is not the same as saying that you can add VAT on top when you bll it to your customer.  In general, where a contract is silent on the matter of VAT the sums quoted are taken as including VAT.  That only matters if your customer is not VAT registered, of course but you don't say if it is or isn't.  If you can't add VAT on top, then you must treat it as being inclusive of VAT and stand the charge yourself.

It is clear that you must add vat on the recharge of the airline ticket.  That exact situation is dealt with in HMRC guidance

http://www.hmrc.gov.uk/vat/managing/charging/disbursements.htm

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