Flat Rate VAT and re-imbursed expenses

Bill L. 22 years ago

Could someone clear up a query I have regarding how Flat Rate VAT scheme applies to this scenario involving a IT personal service company. I'm sure this is a really stupid question, but I can't seem to get a clear answer.

I read that Flat Rate of VAT is applied to the 'total turnover'. I suppose I am confused over what they mean by 'total turnover'.

Where legitimate expense has been incured such as cost of rail or flight, hotel bills, and a client agrees to pay this, should these expenses be included in the 'total turnover' ?

eg. suppose the client pays £1000+VAT for work done. But there was also £200 incured expenses for overnight accomodation, travel etc. The client agrees to pay the £200 expenses to the service company. The service company then passes the £200 to the employee to re-imburse them for the incurred expenses.

Does Flat Rate VAT apply to just the original £1000, or to the £1200 value?

bill

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Ronald Raygun 22 years ago

I reckon that if the company invoices the client for the expenses, then they count as part of turnover, just as they would if the company had not specifically charged for the travel etc, and had just billed them for an inclusive £1200.

It might be different if the client were to bypass the company, and reimburse the employee directly.

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Bill L. 22 years ago

Thanks, I suspected the expenses has to count as part of turnover, and to charge VAT on the expenses too.

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Doug Ramage 22 years ago

An alternative option, although not always feasible, is for the client to contract for the expenses directly. This would keep your turnover lower.

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Jon Griffey 22 years ago

In article , Bill L. writes

Expenses recharged will normally form part of turnover.

Hence the sales invoice will probably be 1,200 plus VAT of 210 (i.e. VAT is charged on the expenses recharged).

Under flat rate this might work to your advantage as often the actual travel expenses that the individual incurs will be zero rated.

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