Invoices for expenses

[likessleep]

I started up freelance a couple of months ago.
I now need to send out an expenses invoice, which includes costs for hotel / food / petrol etc, which I charge on at cost.
I couldn't get hold of my accountant yesterday, so I thought I'd post here in case I'm asking a really obvious question!

Does anyone know if I need to separate out NET amount from Gross amount for expenses? Ideally, I'd just charge say £70 hotel, £18 food, 40 x 0.40p per mile = £16 and total for example. But wondering if I need to break it down.
Petrol I guess I can't, as I'm charging 40p per mile. I just wondered with hotels really.
Thanks

What exactly do you mean by net?

thanks for posting.

do i need to break down the fee?

for example, if a hotel is £45 without vat, but has £6.75 vat and total fee of £51.75.

do i include this breakdown on the invoice? or can i just specify £51.75?

from looking at hm revenue and customs, it seems that there is a distinction between disbursements and recharges, which i am trying to work out.

thank you

you need to break the vat out separately.if you are vat registered you just add your VAT to the net amount. If not, just show the VAT amount separately - call it VAT on expenses and then add it to the net amount to show total expenses. You will probably need to send them the original receipts too.

That's interesting. In 20 years of working with agencies & consultants I've never seen the VAT shown separately for expenses?

I'm a consultant, and I must admit I just add the expenses at the gross level.
Nobody had challenged me yet!

I'm seeing this difference when I have been looking online at this. It seems quite confusing. I am going to ring HMRC on Tuesday to ask, but I guess they will tell me to break out the VAT.

When I have worked in agencies, I did the same thing Legacy - just charged total gross on expenses. It's confusing.

Thanks for posting.

MrVibrating - do you understand the difference between disbursements and recharges? It seems that if you're purchasing something on behalf of your client (say a website domain or stamp duty if you're a solicitor), you don't charge vat and it's a disbursement. But, if you're buying something during the course of you're work, say train tickets, or hotel etc, then you do. This is a recharge. Do you know if this is VAT on net or gross amount? Surely if it's on gross, the client is essentially paying VAT twice?
I think hotel / subsistence / room hire would therefore be recharges.
I definitely need to speak to my accountant. I'll post up what I find out.
Thanks so much for your thoughts.

oops sorry, i didn't mean to post that, i was in the middle of editing it on my phone and i thought i had abandoned it!

What i meant to say was if you are not vat registered you don't have to break out the vat amount, but if you want to you can do it the way i suggested.

If you are vat registered you must add vat to the net amount of the expenses: you will claim the vat you have paid on these as input tax on your vat return.

mrvibrating - thanks for posting.
i am vat registered, so i need to do this then. could i be cheeky and ask a couple of extra questions:
1)can i combine costs? so for example, i often have about 10 or 12 separate receipts for food for each project. if i add these all up and their cucumulative vat value, is that okay? or do they need to be separate entries?

so i am totally clear, i bill the following example:

food for likessleep
£500 net £533 gross £33 vat

total £533 (the client pays)

clear as mud

Ah, if you are VAT registered it is all very simple. You can just add up all the net amounts together and show them as one figure on your invoice called 'Expenses'. Also include car mileage and any daily allowances at whatever rates you have agreed with the client. You don't need to add the VAT amounts or gross amounts up at all. Then include the total net figure in the amount you calculate VAT on so your bill looks something like:

2 days consultancy @ £750 per day £1,500
Expenses £500
Total Net £2,000
VAT @ 15% £600
Invoice Total £2,600

Note that you must charge VAT on all of the expenses, even those where you weren't charged VAT (train fares for instance). This is because you are not selling your client a train journey, you are selling your services and everything you charge for your services must have VAT on it.

If your client cannot claim this VAT back - a bank or a charity for instance - it is therefore better for them to book and pay for directly train fares and flights for journeys they want you to take,

Disbursements on which you do net charge VAT are a horrible grey area that you don't really want to get into. I should probably stop there because I don't want to cut across any advice your accountant might give.

Sorry for the initial confusion - it was my first experiment with Mumsnet posting on my new phone, and I think it will be my last

thank you so much for this information - much appreciated