I have noted that a client has not charged VAT on travel. The scenario is that his staff visited the client and agreed the amount to be charged for travel. When an invoice was raised the work done had VAT added to it but not the travel. Paragraph I told him that travel can never be on behalf of the client as far as VAT is concerned and must be charged. Paragraph I would feel happier if I could quote a cast-iron reference to him. Can you tell me what this would be please?
Replies (12)
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I think your client is getting confused with public transport which is vat exempt. However, when you charge a client you must charge vat for this. The following link may help
http://www.hmrc.gov.uk/vat/managing/charging/disbursements.htm
Pedantic
The link explains the situation re disbursements but in your instance the cost of travel is subsumed into the principal supply and VAT is charged accordingly. However, travel on public transport is Zero rated - not Exempt!!
@ Shaun King - you are
@ Shaun King - you are correct that it is in fact zero rated - Monday morning syndrome has struck me.
@mrme89
And struck you quite badly, since it's over 24hrs from the time Monday morning syndrome hits :)
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It was a long weekend! It’s my 24th tomorrow and it was a warm up session for the weekend to come :)
Flat Rate
The price of the supply to the customer is the fee charged plus any expenses. Rail fares (or other zero rated fares) are supplied to the trader, not the customer so when the cost is charged on, it becomes standard rated. This is great if you use flat rate, as the trader gets to keep part of the VAT.
Give him an example
Say he wants £100 for his work and his expenses are £10, then his fee to the client is £110 - plus VAT at 20 % or £22.
The easiest answer to his question is what is he being paid by his client - answer £110 to which VAT is applied. He can't do his job unless he travels to the client so that is part of the cost of him doing the work.
He could please himself
..... and not charge VAT. Then he could get an assessment at his next VAT visit. Up to him really.