Paying expenses on behalf of subcontractors

groundy

I have a client who is a gas engineer that works outside the scope of CIS. On large contracts he uses the services of subcontractors. These contracts are usually away from home and incur overnight accommodation, which in turn includes subsistence.

The client is a limited company and therefore I am fine in how to treat his expenses. However, he has started to book the hotels direct and pay for all the rooms required and is paying for an evening meal for all subcontractors on the job.

I am not concerned with the employed/self employed argument as this is covered, however I am unsure as to whether these can be claimed as business expenses by my client including recovering VAT or should they be deducted from amount paid due to subcontractor or indeed, should my client be paying these expenses at all.

I am struggling to find any guidance on HMRC and would be most grateful for any comments.

Cheers Ste

stevo5678

If the subbies insist on him paying the travel and meal costs as part of their fees to your client then it is income in their hands and an allowable cost in your client's.

BIM45045
"However, if the contract with the outside labour supplier specifies that the workers be provided with subsistence during the working day, or with the use of a staff canteen, then the costs incurred are not disallowed by the legislation. Similarly, meals given to a self-employed person contracted for a particular piece of work may be regarded as part of the cost of that contract."

The accomodation costs are normal costs for your client.

BIM04046
"You should not treat the cost of accommodation for outside workers (for example, tradesmen engaged on repair work) as business entertainment because they are directly involved in the business and because the accommodation can be regarded as part of the price paid for the work undertaken. However, accommodation provided for visiting suppliers is disallowed under the legislation because they only have an indirect connection with the business and the expenditure incurred is hospitality."

If the first paragraph does not apply then entertaining rules for subbies may come into play or if he claims the costs back you will need to determine if it is a 'recharge' for vat or a non-vatable 'disbursement'.

http://www.hmrc.gov.uk/vat/managing/charging/disbursements.htm