How do you pass on costs that include VAT if you are not VAT registered

[NoNickname]

I'm a marketing consultant and have a client who wants to do some direct mail. The Royal Mail charges me VAT on its costs, but I am not VAT registered. I'm not hiding anything, but my VAT registered client can't reclaim the VAT if I don't detail it, which I don't.

Is there any way around this? Or do others just do the same as me?

For example, say my cost from Royal Mail is £1000 plus VAT = 1150.

I charge the client £1150, but he can't reclaim that £150 VAT, can he?

Bump

Couldn't your client pay the Royal Mail costs himself (so he can claim vat back) and pay you separately?

You can't add VAT to the cost of your services, but what you are talking about is in effect a disbursement - if you don't charge for the total price you paid including VAT you will end up out of pocket.

Detail the VAT paid and provide your client with the VAT invoice and then they will be able to claim it back.

Or you could just register....

Just to confuse further, if you were registered for VAT then you would have to charge £1150 + Vat on that! (Although you would be able to claim the first lot of VAT back)

Basically you have bought something for a price and then sold it on - each transaction requires VAT to be added.

Best for him to buy direct then pass on to you.

Georgimama - can I charge/show VAT on an invoice if I'm not registered for it?

Yes, absolutely, just not on your services - if you have bought something for the customer which included VAT you would pass that on.

So your invoice might say

To my professional services x pounds

Expenses
Royal Mail postage (inc VAT @15%) y pounds

Total z pounds

Tabithacat I'm sorry I think you're wrong. I'm a lawyer, when I bill I include VAT on my time and pass on disbursements, some of which incur VAT, some don't, depending on the VAT status of the supplier.

But I don't then add an extra 15% VAT. VAT only gets paid once.

georgimama speak da trooff.

Re the disbursements.

Oh dear.

I think the OP has ended up with answers that does not fit his questions (he can't reclaim that £150 VAT can he? and can I charge/show VAT on an invoice if I'm not registered for it?).

The answer to both questions is no.

There are only two ways to change that:

1. Get the client to pay the Royal Mail direct
2. Register for VAT so you can claim the £150 as input tax, and charge the client VAT on the total of your services and the £1,000.

Of course if you can't/don't do either of these then you are perfectly entitled to charge the client £1,150 (or any other amount) for the Royal Mail services. What you cannot do is charge him £1,000 plus £150 VAT.

I am afraid the statement 'provide your client with the VAT invoice and then they will be able to claim it back' is totally wrong. Your client can only claim input tax on invoices in his own name.

Thanks MrVibrating - that is what I was going to do - just charge £1,150 and not mention the VAT. I won't be claiming it back as I am not registered.

I'm sorry - I stand corrected. Thanks for pointing it out!

I have just looked up the position of the disbursements and georgimama and stickylittlefingers are perfectly correct (as they knew!)

The expenses that I pass on are not classed as exempt hence my error in thinking.

Glad NoNickname has got an answer.