Can anyone please advise someone new to working as a contractor if:
1) VAT is added on top of the 40p/mile when billing customers for mileage to travel to work sites 2) Reasonable food bills during business trips can be included as a legitimate expenseThanks.
Yes, but some company droids will try to argue that you should claim back the VAT due on the fuel and not charge them VAT on the fuel. If in doubt ask HMRCC, but where 40p mile is being claimed it is my experience that it is VATable.
Note that you don't have to charge 40p/mile, you could charge the actual cost. However most customers think they can get away with paying the same mileage they pay their employees.
What does your contract say?
The actual cost is probably higher once you factor in car depreciation and the true cost of motoring!
Nothing with regard to claiming minor expenses. The contract is with the Ministry of Defence. If anyone has had dealings with them before and can advise me what acceptable practise is...
It depends what you've agreed with them beforehand. Unless your contract has got provision for travel/subsistence, your client would be entitled to expect those costs to be borne by you (actually, by your one-man company, presuming you're not self- employed, which would then reimburse you, personally for your OOP expenses).
What you can't do is agree a price, or a daily/hourly rate for a job and then add on extras, like mileage for commuting to their office, or billing them for this time. Likewise if you've accepted a contract so far from home that you have to stay away, then unless you've got them to agree to pick up (some or all of) this cost, it comes off what you've agreed to bill them. You're expected to build the cost of overheads into the fees when negotiating your price.
If there's been a major change in what the client is asking you to do, then you'd need to renegotiate the terms - or at least get a letter/email from them agreeing to pay extraordinary costs.
FWIW, my terms of business say: All reasonable expenses will be charged at cost, and car mileage at 75p per mile. VAT at the appropriate rate will be added to the fee rates and other charges set out in this note.
I've never had the expenses queried.
Just as important, do you charge for travel time at your full rate?
It is 45p per mile now, and if you charge it from a VATable company / business then you [must] add VAT (which they recover). OTOH if reimbursed to you directly then you do not charge VAT.
I used to deal with other expenses in the following way: -
"Where the consultant is required to travel and / or work away from home / normal place of work on [client] company business then the consultant will be entitled to expenses wholly, properly and necessarily incurred on the company's business on the same basis as the person who signs this contract for the company.".
This ensures that you get plane travel, hotels and meals on the same basis as senior management and not desk donkeys. You can put "same basis as the person who authorises timesheets" or similar if they argue.
Though it must be said that if the client simply refuses to pay your expense claim, you have very little recourse that doesn't involve suing them (which would probably result in not having a contract any more). Plus, there's a fine yet fuzzy line between not getting reimbursed and having the reimbursement delayed for an extremely long time. No matter what you might have agreed about timeliness.
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