We have a client who travels to and stays in America whilst carrying out Training and Consultancy work. Their sales invoices to the customer are for Training / Consultancy and also for expenses incurred but do not have VAT added to them. Our client is on the VAT Flat rate scheme and therefore are we correct in not calculating the Flat Rate % on the total of those invoices when preparing the VAT return?
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Flat Rate Scheme
If the client has a large proportion of his income generated from non-EU activities, do consider whether the FRS is worth using.
Probably - in fact, almost certainly.
The value of his services is his fee plus all his out of pocket expenses.
Reimbursals are turnover
You can only exclude expenses from the flat rate calculation if they are disbursements. These are expenses that are the customers that you pay. e.g. Accountant files Annual Return, then bills the client for doing so including the filing fee. The filing fee is a disbursement and outside VAT.
When they are your own expenses (such as the cost of you getting to a client site) that are billed on to the client they are part of VATable turnover. As well as being included in the FRS calc, they should have had VAT added to them on the invoice.