It’s a while since I’ve raised an invoice where I’ve got items to rebill to the client, however things seem to have changed (they may not have done, I may just not remember). The client is overseas and outside the scope of UK VAT. Some of the purchases were overseas whilst visiting the client and they have overseas VAT included (so I marked as out of scope of UK VAT), some are UK purchases with UK VAT included where I have included the full amount of VAT. When I select the purchases to rebill and get them into the invoice, the unit cost excludes the VAT, but then assumes that all lines need VAT adding and adds 20%. If I mark the invoice as out of scope of UK VAT, then tick the box to show line totals inclusive of VAT, I get some pretty odd behaviour and it looks like it’s going to be a very manual process to get every line right.
Basically, I need to recharge the client excluding VAT for the UK purchases and with no VAT added at all for the overseas purchases. What’s the easiest way for me to set this up please?
Nothing has changed here, but I just want to clarify a few points to ensure it’s handled correctly.
Is the cost for something you’ve purchased for your client (e.g. a registration fee or charge), or is it something related to a job (e.g. stock, travel expenses, postage costs, etc.)?
Is your client aware of the purchase being made on their behalf by you?
Are you adding anything to the cost (e.g. a handling fee), and if so, is your client aware of this?
The reason I ask is that it may be a disbursement rather than a recharge, and the handling of each differs. For example, if it’s being recharged, typically there are limited circumstances where you can rebill without VAT.
Thanks for getting back to me. All the purchases were travel expenses. Yes they were aware. No I’m not adding any markup.
I had to do the invoice so I already made some choices and did it manually. I marked the invoice as out of scope for UK VAT. I then editted each line to include the overseas VAT where Quickfile wasn’t including it from the purchase (although as I had marked all these purchases as out of scope I don’t recall if any actually had VAT in… there might have been one or two where a UK service supplied overseas services, e.g. train tickets in Europe). Since these overseas purchases all had overseas VAT on them and I had no way to claim that back I had to include the overseas VAT on what I rebilled to them. I don’t charge them UK VAT on my invoices, which I believe is correct.
For travel expenses, there’s something to consider with this -
Travel Expenses: If you purchase an airline ticket to visit a client or travel to a job, and recharge the cost to your client, you must charge VAT because the flight was for you, not for the client.
Now, I’m not an accountant so it may be best to double check with yours if you have one, just to be safe.
In short, if the purchase was wholly for the benefit of your client (e.g. buying a subscription for them, and only them, to use) it could be classed as a disbursement, so the VAT is handled by them and it can be excluded from your own income and turnover.
Thank you, I had not understood about disbursements and how they are different from recharging. So these travel expenses would be subject to VAT. However, the client I’m rebilling these to is overseas, so they are outside of UK VAT scope anyway so no VAT to charge in this case. Does that sound right? I’ll certainly ask my accountant.
