VAT on Reimbursed Income

VAT on Reimbursed Income

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I have the situation where there are three companies A, B & C

Company B provided goods to Company A and invoiced £600 for them.

Company B is not VAT registered so no VAT was charged on the invoice.

Company B then receives £600 from Company A

Company B then subcontracted the work out to Company C (which is the only one of the three which is my client) for £600

Company C now needs to raise an invoice to Company B, however Company C is VAT registered and so needs to charge Company B £600 plus 20% of £120 giving a total of £720.

The way I see it Company B receives £600 from Company A, then receives an invoice for £720 (£600 + £120) from Company C so Company B has actually made a net loss on the deal of £120 because they're not VAT registered.

I hope the above makes sense. Would welcome any comments if I'm missing anything??


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Euan's picture
By Euan MacLennan
01st Jul 2013 11:48

What is the connection?

I am confused.  What is the connection between B invoicing A £600 for goods and C invoicing B £600+VAT for work done - apart from the amount?  Presumably, there is some connection for you to say that "B has actually made a net loss on the deal of £120".

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