Claiming VAT on disbursements/recharges from non-VAT registered business

Claiming VAT on disbursements

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I have a client who is VAT registered and, due to cash flow issues, their management company has been paying for expenses and then recharging on a regular basis. The management company is not VAT registered but the expenses which they have paid for include VAT and were for my client, who should obviously be claiming this back.

What is the correct treatment - in my mind the expenses should just come to me not via an invoice and the balance recorded as a creditor/loan, but the management company seems to want to invoice to keep things 'tidy'.

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RLI
By lionofludesch
27th Jun 2016 10:50

To whom are the services/goods supplied ?

Who is supplying what to whom ?

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Replying to lionofludesch:
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By jimbok
27th Jun 2016 11:02

The services/goods are often of a cash nature e.g. fuel for the van. They're just being paid for on the management company's credit card to help cash flow.

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RLI
By lionofludesch
27th Jun 2016 11:24

Quote:

The services/goods are often of a cash nature e.g. fuel for the van.

"To whom was it supplied?" was the question I asked. Whether or not it was paid cash is irrelevant.

If the goods were supplied to the client, the management company should pass on the original invoices to you.

If they were supplied to the management company, then the management company should reclaim the input tax and charge output tax to the client on its own invoice.

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By jimbok
27th Jun 2016 11:39

Apologies, I stated the expenses were for my client in my original post but should have been clearer.

Yes they were all supplied to my client. I have the original invoices as back-up, along with the management company's recharge invoice.

As I mentioned, the management company isn't VAT registered so therefore can't reclaim the VAT or charge output VAT on the recharge invoice to my client.

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By lionofludesch
27th Jun 2016 11:48

Sorry, I missed that.

So long as the management company are passing on the cost and not charging a different amount, I don't think you have a problem.

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By nicholast2401
29th Nov 2022 13:31

Hi, I have a similar question. If a non-VAT registered supplier incurs expenses which include VAT, and they charge them to me gross, i.e., at the VAT inclusive price, and also provide copies of the receipts then can I reclaim the VAT (I am VAT registered)?

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Replying to nicholast2401:
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By lionofludesch
29th Nov 2022 14:30

Quote:

Hi, I have a similar question. If a non-VAT registered supplier incurs expenses which include VAT, and they charge them to me gross, i.e., at the VAT inclusive price, and also provide copies of the receipts then can I reclaim the VAT (I am VAT registered)?

No. Absolutely not.

They haven't charged you any VAT. There's nothing to reclaim.

However, if he incurs them as agent for you, yes you can.

So, who is supplying what to whom?

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Replying to nicholast2401:
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By Hugo Fair
29th Nov 2022 15:05

To put it more bluntly than lionofludesch has already kindly responded ...
... your "non-VAT registered supplier" by definition cannot either charge you VAT nor claim back the VAT on their purchases ('cos they're not registered).

You could decide to purchase the goods yourself (if that doesn't upset your supplier) and, so long as the goods are a valid supply for VAT purposes, you can then reclaim the VAT ('cos you are registered).

Hence the cry of "who is supplying what to whom?" ... which can only be answered based on the facts, not on ultimate intentions.

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