Recharging Expenses Help please!!

Blonde Accountant

Hi, can anyone help please? My client is currently contracted to a company and he travels a lot. When I recharge his expenses to the company, I know that I have to add vat onto flights and food, but what about expenses incurred when abroad. These expenses are hotel bills and water taxi's. Because they are from Copenhagen and Belgium should I treat them as the rest of the expenses and add vat or not?

I hope that I have explained that well enough.

NeilH

Hi

I'm not VAT expert but an ex-colleague of mine was studying IIT and from what they informed me, VAT on recharged expenses (that are considered disbursements) is charged in the same way as it was originally charged. I.e. if no VAT was charged, no VAT is re-charged, if VAT was charged at a reduced rate then the net amount is recharged plus a reduced rate of VAT. However, it can depend on whether or not the recharge is considered a disbursement. My gut feeling is that hotels wouldn't be considered a disbursement.

Like I said, I’m no VAT expert, and it's been a while since I’ve dealt with recharges, so perhaps someone else can clarify?

Neil

Monsoon

Disbursements are where you incurred the cost on behalf of the client, e.g. You bought the flight for them, they were the one 'enjoying' the expense. in that case you can charge it at cost with the original VAT treatment. A flight is not a disbursement if you were the one on the flight, even if it was on business for them. In this case you charge standard rated VAT on top.

There is a good link on the hmrc site about disbursements, google it (I can't link am on BB).

If the expenses were not disbursements I would expect to charge standard rated vat on all expenses including forgeign ones.

Blonde Accountant

Thanks guys. Monsoon , you've confirmed it for me. They are not disbursements, but expenses so vat has to be charged. Thanks loads for the help.