Some background to start:
We employ 4 employees who work for anorther company within our group. We are not part of a VAT group and each has our own VAT number.
We pay their salaries, expenses and Visa cards. They submit their expenses to us and we analyse and recliam the VAT. We then recharge the Net amount to the other company.
My question is do we charge 20% VAT on our invoice to the other company?
Replies (10)
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Hi Les
Can you explian why this is as the company has come back saying they don't agree with our invoice and they believe the VAT amount should be the VAT amount we reclaimed and not the 20% on the net amount we've charged.
Thank you
Hi Christine
As Les says, the supply of staff is itself standard rated. So you are correctly charging VAT on the wages recharged.
The basic VAT rule is that any supply of goods or services is subject to VAT. Unless it's specifically excluded by being out of scope or exempt.
Perhaps your other company could explain to you why they think your supply of staff is not subject to VAT.
I would guess it's the usual misunderstanding - recipient thinks that because wages are outside the scope of VAT any re-charges should be treated likewise. If they want to avoid VAT on the charges they need to set up a paymaster arrangement. (Or perhaps there already is one.)
https://www.gov.uk/guidance/companies-that-supply-staff-and-staff-bureau...
Paragraph 3.3
Yes - exactly right.
You should be charging VAT on the entire amount you invoice to the other company.
If the 'other' company is partially exempt, so that it is unable to recover the VAT in full, then you might consider other options, such as joint employment contracts, or Group VAT registration.
I am in a similar situation, where we employ staff & pay their expenses and then recharge another company in the group, however that company is in Austria. Am I correct to not charge VAT?