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Company claiming VAT on freelancer expenses


jbaileypro

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A client of mine requests receipts for any expenses that I have made during during onsite work. I originally thought that this was due to making sure freelancers weren't over-claiming for expenses. I usually have to pay for multiple people's expenses on site (mainly their own employees) if a company credit card hasn't been provided. This can add up quickly if its dinner for a few crew.

 

I recently found out that they were claiming the VAT back on the expenses and receipts I was sending through to them. I put these expenses on the invoice with the rest of my bill (but itemised for each expense).

 

I didn't think they would be able to claim the VAT back due to:

A - purchasing the expense on my own personal business account

B - putting these on the final invoice to them (I am not VAT registered myself)

 

I know that the company should provide a credit card for expenses on site which would bypass any issues. I have also had other freelancers recommend that I should just be putting my expenses as just one total on the invoice (possibly a total for each day).

 

Has anyone else encountered this situation?

 

Thanks,

 

 

 

 

 

 

 

 

 

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Sounds like they’re treating you as staff, which is patently wrong.

 

You could maybe provide a photocopy with “VAT paid by *insert your company name here*” just to prove you haven’t been over-spending.

 

Otherwise they need to be giving you cash or a card that they pay for.

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I would not be surprised if a company was not keen on issuing a sub-contractor with a company credit card. Giving someone a cash advance to pay for subsistence or other outlay begs the question of spending more or less than the advance, and how to deal with balancing that, so the simplest option seems to me for them to reimburse the exact amount on production of receipts. Can't see why they shouldn't claim the VAT back on things they have effectively paid for?

 

I can see where it might be complicated for a sole trader who is VAT registered - would such a person be themselves claiming back VAT on the price of the meals paid for? Would they therefore need to present a VAT invoice for an equivalent amount to the client, who would then be able to claim back the VAT in their own turn? I'm not VAT registered, so this is speculation.

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Surely as self employed the fee that you quote for the job includes anything you might need to purchase whilst on site. They are taking advantage of you by borrowing from you the money to buy food for their own staff. If you put a 20% markup on those sundries before billing them I'm sure they'd work out a different way of doing it
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As long as you have not added your profit allyou have done it seems to me is to act as an agent for the client who has refunded you fully for face value of the reciept. I seem to recall from the dim and distant past two sorts of such transactions expenses and disbursements but you'd need to read the VAT manual to see if they were treated differently. If you wereVAT registered and submitted a non itemised invoice for services rendrred with VAT added they could claim that back so why not this?
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As an employee and a sub contractor I have regularly handed over receipts for expenses purchased on my own business name accounts (CPC as an example) and always assumed the VAT could and expected it would be claimed back. After all VAT has been paid and it is a genuine expense.
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If you're invoicing them rather than simply claiming your expenses back in cash, surely they shouldn't be taking the receipts from you? 1) They're paying you against a line on your invoice, so that should be all the paperwork they need to account for that payment. 2) I'd imagine you would need the receipts for your accounting purposes.
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If you're invoicing them rather than simply claiming your expenses back in cash, surely they shouldn't be taking the receipts from you? 1) They're paying you against a line on your invoice, so that should be all the paperwork they need to account for that payment. 2) I'd imagine you would need the receipts for your accounting purposes.

 

When I used to work via my own limited company, a client paid invoiced mileage at a fixed rate per mile, and then they suddenly wanted the fuel receipts, I pointed out my company was VAT registered and as they were paying mileage with no issues, the only reason they would want these was to claim the VAT element back, which my company had already done in paying me. Told them this appeared to be "trying to take two bites of the cherry" and heard nothing more.

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I didn't think they would be able to claim the VAT back due to:

A - purchasing the expense on my own personal business account

B - putting these on the final invoice to them (I am not VAT registered myself)

 

I agree with you.

 

Your expenses are for your business. You are not VAT registered - therefore you cannot charge VAT to your customer.

 

It's just the same as if I (as a VAT registered entity) buy an item from a non VAT registered business - they cannot charge VAT and I cannot try making an input VAT claim.

 

If they had a petty cash system and reimbursed you for small purchases made on their behalf, that might be a little different....

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This has been a sore point on a business forum this year - it seems to be a practice that is growing, and is indeed simply an untapped source of VAT recovery, but the problem is that only one party can reclaim VAT, and for me - that is absolutely ME. My expenditure goes in one section in the software, and the VAT is calculated for the return. If I invoice a company for the job, then these will be on my invoice, including VAT added as applicable. They are free to claim that back. If I provide the receipts, then I don't have them for my accounts, I lose out. In fact, what I sometimes do is take the receipt for the items I bought to use on the job - gel, fluids, cabling etc and invoice them for the gross price I paid, and then the VAT adds to the price, which they get back. I then keep the difference as extra margin. If they look on the net, most sources price inc VAT, so if they check how much 5ltrs of X fluid costs on Google - my invoice amount has that price on it. I think it covers me having had to pay for it up front, yet wait ages for the invoices to be settled.
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Once an item has been invoiced by a UNregistered (for VAT) entity, any VAT content is not reclaimable by anyone else.

If they settle the amount with you off the invoice then they can reclaim the VAT just as they should if an employee of theirs buys something for them and gets reimbursed.

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