I work for a consultancy company and I am slow learning the book keeping side of things ( not my forté at all ) so my question may seem a little obvious to some but here it goes.
My boss provides consultancy services and also does health and safety presentations (we are vat registered). With regards to the H & S presentations, he sometimes does them with a legal company who organise them and we invoice them, and sometimes he works direct with the company he is presenting to. Up until now I have been charging out everything plus 20% VAT, e.g. cost of train ticket plus 20%, cost of hotel plus 20%, cost of taxi plus 20%, cost of presenting plus 20%.
He now has said that I should be doing the invoices as follows: train tickets plus 0% vat, hotel net price plus 20% vat, cost of presenting plus 20% vat (same as above), taxi plus 0% vat.
He has now confused me totally, I was under the impression that everything I invoice out should be plus vat. Can someone enlighten me as to how to go about which vat rate should be used in the most simplest of terms.
Sorry if this seems to be a brain dead question to some of you guys.
If you are recharging travel and accommodation expenses as separate items on the invoice, then you should be charging VAT on them on your sales invoices.
Note though, that the cost of flights, and train fares are usually zero rated to you, so there is no VAT to claim back (you still have to charge VAT to your customer though).
It sounds like he thinks these are disbursements of expenses to his client but they are not, they are services supplied to him.
This link may help. If you look at the 3rd section "What is not a disbursement" it explains it better
Thank you for your answer, yes it does help. Just to clarify then with regards hotel rooms etc if we paid in total £100 for the room should I enter that in to the invoice as 100 plus vat or 80 plus vat?
Just to confuse me even more the Consultancy company is not a limited company itself but it is a nominal code within a sole trader who is vat registered. I hope that makes sense. When I enter any items from the bank statement it is always under the one nominal code no matter what the receipt / invoice is for.
Hope this explains it ok for you. Our book keeper has told me what to do rather than me understanding why I am doing it so my explanations and terminology are slightly on the poor side.
You can charge what you like for the expenses but it sounds like you do not want to make a profit on it, so you charge out the accommodation at cost before the VAT is added. In your example you would charge out £80.00 (it is actually £83.33 if the the full amount is £100) then the vat is added at the end.
Some consultants just invoice a whole charge, without itemising expenses, as these are just a cost. As an example you may have a consultancy job worth £500 + £100 expenses + £120 VAT = £720 but invoiced at £600 + VAT (Still = £720 total). The cost of accommodation/ travel may have only been £50 inclusive of VAT! It doesn't matter, as it is a commercial decision what you charge a client
Just to clarify, your boss is a sole trader/ self employed? and none of the trading is done through a ltd company? The reason I ask, is that it is the person (or the entity in the case of a Ltd Co) that is VAT registered, so in this case it is correct, VAT should be applied to all charges on the invoice.
I guess the consultancy nominal code, is there so that he can analyse the separate income types. It makes no overall difference to his profit
