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Incurred expenses invoice12/31/2023 If you have a business expense and are unsure whether it might qualify as a disbursement HMRC provide an eight point check-listwhich you can use to assess the expense. purchase of a domain name for use by your client. a web hosting contract that you arrange and pay for on behalf of your client software purchased by you that will be installed at your client’s site and become their property In this case, you may have the option to treat the expense as what the Revenue calls a disbursement and to exclude it from your VAT calculation when you invoice. your client receiving goods or services) have been achieved without your involvement? If the answer is ‘yes’, then it is likely that you have acted as an agent or middle-man rather than as the final recipient of the benefit of the expenditure. This scenario can usually be identified by a simple test – could the end result of the expenditure (i.e. Scenario 2: The expense was incurred on behalf of your client Make copies of all your receipts – even though they relate to your company’s outgoings, your client is likely to want to see them, and may insist on retaining the originals. If you are not VAT registered, simply invoice the full value of the expense including any VAT. Also, whether you itemise core expenses separately or not, be careful that the values that appear on the invoice are net of VAT – otherwise, when you come to add VAT to the combined subtotal of services and expenses, your client may find that they are being charged VAT a second time on these items. Whether you itemise these expenses separately on your invoice should be agreed between you and the client (it is good practice to do so), but a word of warning – do not agree to use your client’s internal expenses claim form, as this can leave you vulnerable to IR35. If you are VAT registered, you must charge VAT on these items (even if they were originally free of VAT) as they are part of the service that you are providing to your client. Invoicing this sort of expense is relatively straightforward. bank charges, for example for transferring funds to your client. travel, accommodation and subsistence for visits to your client’s site This covers expenditure where you/your company is the final recipient of the service or goods being purchased. Scenario 1: The expense was part of your ‘core service’ This distinction – whether you/your IT contractor company or your client is the final recipient of the service or goods being paid for – determines what options you have for charging the expense back to your client. However, it’s important to be aware that there are subtle distinctions between different types of expenses and that these can have significant implications, in particular for VAT.Įxpenses incurred over the course of an IT contract tend to fall into one of two categories: charges that are incurred by you or your limited company in the course of discharging your contractual responsibilities (commonly including travel and subsistence, postage, phone calls etc.) and charges that are incurred by your client but which you pay on their behalf (for example, the purchase of a piece of software or an Internet domain name that will at the end of the contract remain in the client’s possession). Many contracts allow for some or all expenses incurred to be charged back to the client it’s a convenient way for the IT contractor to insure themselves against the possibility of unexpected additional expenditure during the contract’s execution.
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