VAT on expenses invoiced to employees

VAT on expenses invoiced to employees/contractors

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For context - the source of this is the 'entertainment' industry where the UK based company will generally end up buying things on behalf of the US (or other foreign) actors/directors/models that have been hired and then invoicing the actor/director/model's company for it. It can be anything from flowers for their trailer to hotel meals that went beyond their agreed allowance. Sometimes it's things with no real connection to the job, such as organising a gift basket.

As employment in this industry is freelance, each job (lead accountant) will interpret these costs differently when it comes to the input and output VAT. Some treat it as pure disbursements. Some take the input VAT and then add the output VAT onto the invoice to the talent. One says the VAT cannot be taken as input at all.

I have tried to read up on this independently but most industries seem too sensible to get into this murky VAT area, so am seeking opinions about what the most HMRC-compliant way would be to treat these kinds of transactions.

Replies (5)

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By David Ex
18th Jun 2024 15:13

For context:

“If you intend to plan a course of action based on what you read in here, you should instead be taking professional advice.”

“They are not here to provide free accounting advice.”

You need an accountant.

Other professional bodies are available.

Thanks (1)
By Jason Croke
18th Jun 2024 17:05

VAT is driven by the contractual relationship, so you will rarely get a definitive answer because there may be different contractual flows between different agents and different actors/talent.

To take your example of a "UK company" buying flowers to put in an actors trailer. Why is the UK company buying flowers? Are they contractually obligated to do so? Who is the UK company invoicing, the actor directly or their company? If invoicing the actors company, where is that company formed (resident in UK or USA)? It may be that the answers to these questions change for each job/project and hence creates the air of uncertainty.

There is no murky area of VAT, all there is are people who don't understand how VAT works or not understanding the contractual position of what is being supplied to whom, once you establish what is going on contractually then the murk should clear.

Thanks (6)
Replying to Jason Croke:
By Paul Crowley
18th Jun 2024 19:17

Nicely put.
Your posts are always worth the read, even if I have no similar client.

Thanks (3)
Replying to Paul Crowley:
By FactChecker
18th Jun 2024 20:29

And I get to learn a new word .. it never occurred to me that 'murky' had its origin in a noun - and what an apposite one:
* Murk = darkness or thick cloud, preventing you from seeing clearly:
as in 'It was foggy and the sun shone feebly through the murk'.

A new by-line for Jason? Murk Clearance Specialist (illumination by the hour).

Thanks (5)
Replying to Jason Croke:
By ribbetyribs
19th Jun 2024 09:54

Thank you that is actually very helpful. A lot of the time when trying to address these situations, the lead accountant will say 'that's how I've always done it'. This gives me helpful terminology to ask for proper examination of the situation.

Thanks (0)