My client ( construction industry ) has subcontractors working for him.
Each month they submit invoices for labour and expenses and some materials.
My client deducts 18% of the labour element and pays the balance over to the subbys. I E net labour + expenses.
Subbys are not registered for VAT
Can my client claim the VAT back on the expenses submitted ?
Further more my client has lost some receipts from the subbys. Can i still claim the payments as a expenses without the receipts ? If not how do i account for the payments ?
Any help greatly appreciated
Thanks
Anon
Replies (3)
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No.
Your client cannot claim VAT on the sub-contractors expenses as they are not supplies to, or for the purposes of, your client's business.
The expenses form part of the cost components of the sub-contractors supply to your client. Indeed, the separation of the expenses on the invoice is in reality artificial. It does not form a separate supply to your client but is a way of working our how much the sub-contractor charges for the work he/she is carrying out.
Hope that helps explain the position.
Regards
Paul Taylor
VATease - Celebrating 15 years of VAT Advice
Expenses
Technically you cannot reclaim the VAT because they have gone through the hands of a non-registered trader.
You could if the expenses were contracted for in your name, and the subbies acted as your agent. You could set up accounts with suppliers that can be operated by regular subbies. The bills then get sent straight to the prime VAT registered contractor.
The danger in doing this is that subbies that work for you a lot might end up becoming employees in the eyes of the Revenue.
The fact that the subby has lost some of his expense receipts is his problem. The only receipt you need is his invoice with the relevant split of materials and labour clearly written on it.
NeilW