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Parking and refreshments/working lunch expenses both come with VAT input tax; train fares of course don't. EG:
Expenses with their input tax £200 (net of it may be £180)
Add VAT output tax @20% 240
Bill to Client £1,440?
Hi again.I know you've already looked here but it is helpful though there could be more examples.A disbursement is usually an expense that you have incurred on the client's behalf and that it would normally be the client's responsibility to pay. For instance, I may pay a Companies House filing fee on behalf of a client because it is convenient. The charge is the client's responsibility ultimately, not mine. When I recharge a cost cost that would normally be the client's responsibility to the client, I don't charge VAT and I cannot reclaim the VAT back so the recharge will include the VAT I may have paid. For the client to reclaim the VAT, they will need a VAT invoice which may not always be available.As for the types of costs you mentioned in your post, these are not incurred on behalf of the client and are therefore not disbursements. You incurred them on your own behalf. If you are VAT registered and you recharge them to your client, you will have to charge VAT whether you paid any VAT on those costs or not. If you are VAT registered you will be able to claim back the VAT you paid and that means you will probably only recharge the net of VAT cost to your client. If you aren't VAT registered, you will probably recharge the inclusive of VAT charge to cover your costs.
I do know of people who effectively hike such recharged expenses even if they can get the VAT back. They call the excess a service charge.
I hope this helps but let me know if you have any further questions.
Thanks for your reply, but it is extraordinary if there isn't an established rule on something that must arise millions of times a day. Your penultimate paragraph almost suggests leaving the input tax in the expenses is sharp practice.
Obviously if the client is able to recover our VAT output tax (as his input tax) he is not disadvantaged. If he cannot, he might raise questions.
If you have no more authoritative support for "the right way", let us leave your answer as it stands. But it doesn't really help me. Sorry!