Charging VAT on an expenses reclaim invoice

Contractor reclaiming expenses from company

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I have a new client who is a contractor - runs everything through a limited company, submitting timesheets to a 3rd party via his limited company. He is VAT registered and charges VAT on his sales invoices.

He can reclaim all his travel expenses (air fares / parking  / fuel) directly from the company he is contracting for. He has done this once so far, raising an invoice for all the expenses, but he didnt charge any VAT on this invoice.

Is this correct? Should he be charging VAT on top of the expenses reclaimed?

He is flat rate VAT and I will prepare it as a limited cost business, so 16.5% less the 1% first year discount. I'm just trying to work out what to do with the expense reclaim - he's submitted his expenses reclaim via a sales invoice, but I'm not sure how this should be treated for VAT??

Thanks in advance....

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By spidersong
04th Oct 2018 13:22

It's not correct.

His expenses are irrelevant, he's charging the company for his services that's all the company has received, they haven't taken a flight or a train or anything like that. They're paying him for his services as a contractor, they pay VAT on everything they pay for that.

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Replying to spidersong:
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By southgirlaccountant
04th Oct 2018 13:51

Yes i see what you're saying - he should raise an invoice for expenses incurred and add VAT to that invoice. That way, the company he's contracting to will be able to reclaim the vat on that invoice

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By Tim Vane
04th Oct 2018 13:47

Your client should be advised to raise a VAT-only invoice to his customer to recover the VAT he will have to pay over on the expenses. If he does not do so then you should assume that the expenses charged to the customer are inclusive of VAT and he will have to hand over 20% to HMRC.

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Accountants & Business Advisers
By Gladstone
04th Oct 2018 17:32

suggest you issue a credit note for the one without vat and re-issue a new invoice with VAT on expenses.
G

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