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Help with VAT treatment of expenses??

Should I be charging VAT on expenses that we charge on behalf of the supplier to the client?

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Hi all,

I seem to be losing my mind on how to treat VAT on expenses that are recharged to the client on behalf of a supplier. 

So we are basically an agency where we provide contractors to our customers. The contractors go to one of our clients and provide a service to them and they sometimes incur expenses, travel ect. The contractor charge us from there limited company for these expenses after receiving approval from our client . We then pay the invoice and recharge to the client. Do we charge total cost plus vat? 

For example let's say the the expenses came to 10 plus VAT. Then the supplier charged £10 plus VAT. Would we charge the client £12.00 plus VAT as we are providing a service for them or do we charge exactly what we paid?

Any advice would be helpful.


Replies (8)

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02nd Dec 2019 23:15

My advice is as follows;

1) Learn the difference between 'their' and 'there', and the plural and singular.
2) Put this question to your accountant, as the answer is obvious to anyone who is such a person.

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Replying to JDBENJAMIN:
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By Matrix
02nd Dec 2019 23:24

It is not obvious to me.

I would need sight of the agreement between the agency and the client to advise.

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Replying to Matrix:
02nd Dec 2019 23:31

And if you were this poster's accountant, you would have that, so let 'there' accountant answer. We don't have to.

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Replying to JDBENJAMIN:
By KnowledgeShouldBeShared
03rd Dec 2019 08:10

Someone else with a bad attitude. Thank you for picking up on my mistake, I will ensure to remember this next time. I was in a rush when posting this question.

I just wanted some clarification on this as I believe it would be classed as a disbursement and we would not need to charge VAT.

Would it still be wrong to charge VAT on the total amount, if the customer is happy to pay it as they have done on previous invoices?

I did look through the agreement but there was no reference to how we should charge for expenses.

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By sallyrichardson
03rd Dec 2019 10:55

Disbursments can only be charged when you buy something on behalf of the client for their use - ie a software licence. It cannot be used when you or your subcontractor incur the expense themselves i.e. they went on a train and ate lunch.

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By newaccountantsf
03rd Dec 2019 11:58

Hello Knowledge Should Be Shared,

My understanding is as follows with the below examples;

Subcontractor incurs two travel expenses;

1) Hotel Stay at £100 net + VAT
2) Taxi trip at £20 no VAT

Recharge Sales Invoices would be;

Hotel Stay £100
Taxi Trip £20

VAT charge = £25

You cannot charge VAT on an expense which already has VAT charged as this would be a duplication but you should add the 20% standard VAT charge to all expenses which did not have any VAT on them as you are providing services to another company which is a VATable supply.

Hope that helps :)

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Replying to newaccountantsf:
By KnowledgeShouldBeShared
05th Dec 2019 16:57

Thank you for your help. This makes perfect sense to me now. I had a good read through HMRC and came to this conclusion but thank you for clarifying this.

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