I hope someone can help me with what may be a very simple query regarding VAT.
I run a letting agency and sometimes have to arrange work for my clients such as gas servicing and cleaning. Some of these are vat rated (like gas servicing) and other aren't (like cleaning provided by a self employed lady). I have to pass these costs onto my clients and my accountant has insisted for years that absolutely everything I bill my clients for has to have VAT added, as it's all classed as a 'service provided' .
This has always bugged me and caused no end of frustration for my clients, as it seemed so unfair that I had to collect VAT in the first instance, then had to pass on the full VAT-inclusive amount and add VAT again (an even greater amount as it included VAT on VAT!). I was thereby paying more than double the VAT on the item/service.
The accountants were adamant that it had to be done. Well I wish I had researched this sooner, as I have now found our from the HMRC website that these kind of costs can be treat as 'disbursements' and, subject to certain conditions, need not have VAT applied to them when I recharge them on. This makes a big difference to our business, as the vast majority of our clients (although not all) are not registered for VAT, so cannot reclaim VAT charged to them.
This all seems pretty clear to me, but my queries are:
1. The rules for treating a cost as a disbursement say I have to pass on the "exact amount of each cost" to my customer when I invoice them and show this separately on the invoice. However, in some cases, such as cleaning, I wanted to cover some of my overall costs in managing the contract by uplifting the cost of the cleaning - ie. paying £50 to the (non VAT reg.) cleaning lady but re-charging £60 to the (non VAT reg.) client. The trouble is that I don't want either party to know about this extra charge, so I wondered if there was a way I can get around this by perhaps presenting the costs differently somehow?
2. For clients that are VAT registered, they are asking me to purchase items on their behalf, such as cleaning materials. I can bill these as disbursements so they don't pay extra VAT, but they then need to reclaim the VAT as they are VAT registered. However they need a VAT invoice for that, which I could give them, as I would not be able to claim the VAT back myself, but then they would have an invoice made out to my company and for items paid by my bank account, so I don't think they could use that, could they?
3. For all the hundreds, possible thousands of pounds of VAT I've collected over the years that I needn't have, do you think I could make a claim to HMRC for a refund?
I hope someone can help
Thank you.
I run a letting agency and sometimes have to arrange work for my clients such as gas servicing and cleaning. Some of these are vat rated (like gas servicing) and other aren't (like cleaning provided by a self employed lady). I have to pass these costs onto my clients and my accountant has insisted for years that absolutely everything I bill my clients for has to have VAT added, as it's all classed as a 'service provided' .
This has always bugged me and caused no end of frustration for my clients, as it seemed so unfair that I had to collect VAT in the first instance, then had to pass on the full VAT-inclusive amount and add VAT again (an even greater amount as it included VAT on VAT!). I was thereby paying more than double the VAT on the item/service.
The accountants were adamant that it had to be done. Well I wish I had researched this sooner, as I have now found our from the HMRC website that these kind of costs can be treat as 'disbursements' and, subject to certain conditions, need not have VAT applied to them when I recharge them on. This makes a big difference to our business, as the vast majority of our clients (although not all) are not registered for VAT, so cannot reclaim VAT charged to them.
This all seems pretty clear to me, but my queries are:
1. The rules for treating a cost as a disbursement say I have to pass on the "exact amount of each cost" to my customer when I invoice them and show this separately on the invoice. However, in some cases, such as cleaning, I wanted to cover some of my overall costs in managing the contract by uplifting the cost of the cleaning - ie. paying £50 to the (non VAT reg.) cleaning lady but re-charging £60 to the (non VAT reg.) client. The trouble is that I don't want either party to know about this extra charge, so I wondered if there was a way I can get around this by perhaps presenting the costs differently somehow?
2. For clients that are VAT registered, they are asking me to purchase items on their behalf, such as cleaning materials. I can bill these as disbursements so they don't pay extra VAT, but they then need to reclaim the VAT as they are VAT registered. However they need a VAT invoice for that, which I could give them, as I would not be able to claim the VAT back myself, but then they would have an invoice made out to my company and for items paid by my bank account, so I don't think they could use that, could they?
3. For all the hundreds, possible thousands of pounds of VAT I've collected over the years that I needn't have, do you think I could make a claim to HMRC for a refund?
I hope someone can help
Thank you.