Any VAT experts about?

[Brillig]

Just puzzling over an invoice and how much to charge. I'm freelance and VAT-registered. I did a job for a client and had to hire some facilities in order to do it; I will be paying the owner of the facilities. They will charge VAT on their invoice.

So when I invoice my client for my work on the job, should I include the VAT from the facilities invoice? Because then I'd also be charging my VAT on top of the total, if that makes sense.

I have a feeling there's something about 'disbursements' and whether or not you can include the VAT from another supplier....but I'm not sure. It's not very clear from HMRC's guidelines.

Would anyone be able to help?

Your first question is - is it a disbursement? You can read about it here but the basic logic is - who was supposed to pay the owner of the facilities? Was it you or was it your customer?

That said - it may not matter since you're both charging 20% VAT (i'm assuming you're charging 20%?). It'll only matter if your customer is VAT registered and is able to claim the VAT back.

If it's a disbursement you won't have to charge VAT on the cost but won't be able to claim the VAT back. So if your services were £1,000+VAT of £200 and the rental was £100+VAT of £20 your invoice would say
Services £1,000
Rent £120
VAT £200
Total 1,320
Your customer can claim back £200. They can't claim back the £20 in rental since the rental invoice is addressed to you, not them.

You will only need to pay over £200 to HMRC on your VAT return but cannot claim back the £20 that is related to a disbursement.

If it's not a disbursement you will show:
My services £1,100
VAT £220
Total £1,320
Your customer can claim back £220.

You will have to pay HMRC £220 but can claim back the £20 on rental so overall you'll still pay £200.

So, the treatment doesn't matter if your customer is not VAT registered. If he is, he may end up being out of pocket by the VAT amount if you treat is as a disbursement but the invoice is in your name.

Thanks, riksti - very clear and useful. I'll go back and do the invoice thanks to that advice!

I think disbursements are a red herring, the situation should be simple.

You have received a supply from the supplier and claim back the VAT on the supply via the VAT invoice which is presumably addressed to you (if it is addressed to the client, don't pay it).

You then charge the client the net cost of the supply (plus a mark up if you want/can), this becomes part of the cost of your supply to the client on which you charge VAT.

The situation is somewhat complicated if you use a Flat Rate VAT scheme because you can't claim back the input tax: you need to keep an eye on your VAT inputs to make sure the Flat Rate scheme is still worthwhile, or get the client to pay for third party services direct.