Expenses and VAT - Automatic
- Mark Holland (Unlicensed)
- Kelly Collins
Handling VAT on expenses is a complex area and you should seek professional advice where necessary.
The following sections show how you could configure expense templates for your contractors and how these would be paid and invoiced.
We cannot provide advice as to which options may be appropriate for your business. However, should you require VAT/tax assistance, training or a help line service for your business, please contact
Anne Holt
Partner
RSM Tax and Accounting Limited
Blenheim House
Newmarket Road
Bury St Edmunds
IP33 3SB
Telephone: 01284 763311
Email: anne.holt@rsmuk.co.uk
Expense Template Configuration
It is likely that you would need to treat VAT differently for
- PAYE contractors
- Non-VAT registered contractors
- VAT registered contractors
RSM InTime can be configured to automatically determine the appropriate VAT treatment based on the employment and VAT registration status of the contractor. To enable this, tick the "Use Contractor Vat Status" box on the Expense Template.
If you don't tick this box, see the Expenses and VAT page for guidance on configuring your expense templates.
RSM InTime considers a contractor to be VAT registered if the Company Tax Number is populated against the contractor/umbrella record. This is irrespective of the VAT code selected against their record. For example, a worker with a populated Company Tax Number but a 0% VAT Code selected will be considered VAT Registered.
This documentation uses an example expense claim as shown below.
Invoices, Payments and Margin Summary
| Worker Type | Contractor Reclaims VAT | Agency Reclaims VAT | Agency Charges VAT | Pay | Charge | ||||||
| Net | VAT | Gross / Payment | Margin Pay | Net | Vat | Gross | Margin Charge | ||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| PAYE | NO | YES (from receipts) | YES | N/A | N/A | £123.00 | £102.50 | £102.50 | £20.50 | £123.00 | £102.50 |
| Contractor, not VAT registered | NO | NO | YES | £123.00 | £0.00 | £123.00 | £123.00 | £123.00 | £24.60 | £147.60 | £123.00 |
| Contractor, VAT registered | YES | YES (from contractor invoice) | YES | £102.50 | £20.50 | £123.00 | £102.50 | £102.50 | £20.50 | £123.00 | £102.50 |
PAYE Example
The contractor will be paid the gross amount as they cannot reclaim the VAT from the expense receipts.
Your sales invoice will be for the net amount of the expense as you can reclaim the VAT from the expense receipts. You are VAT registered so must charge VAT on top (if applicable for the service you provided).
The margin report will show the appropriate costs/revenue for your agency.
Contractor - Not VAT Registered Example
The contractor will invoice the gross amount as they cannot reclaim the VAT from the expense receipts. They are not VAT registered so will not charge VAT on their invoice.
Your sales invoice will be for the gross amount of the expense claim as no VAT was charged to you on the contractors invoice and you cannot reclaim the VAT from the expense receipts. You are VAT registered so must charge VAT on top (if applicable for the service you provided).
The margin report will show the appropriate costs/revenue for your agency.
Contractor - Vat Registered Example
The contractor will invoice the net amount as they can reclaim the VAT from the receipts. They are VAT registered so must charge VAT on top (if applicable for the service you provided).
Your sales invoice will be for the net amount of the expense as you can reclaim the VAT from the contractors invoice. You are VAT registered so must charge VAT on top (if applicable for the service you provided).
The margin report will show the appropriate costs/revenue for your agency.
