How to handle rechargeable expenses when invoicing your agency.
As a VAT registered IT consultant I invoice an Agency for my time. Occasionally, I recharge expenses for travel and accommodation. My Agency refuses to pay the VAT on these recharged expenses – saying they are a ‘disbursement’ and VAT shouldn’t be applied. I’m out of pocket. Is this right?
No, this is wrong. I have come across this before. Your recharged expenses are part of the supply of your services. If your services are a ‘Standard Rated Supply’, with VAT at 20%, then you must charge VAT on both your time, and your recharged expenses. You could try this; if an item doesn’t include VAT (i.e. train tickets), you should invoice for the amount shown on the receipt; then add VAT separately onto the invoice. For items that already contain VAT, write the net amount in your invoice then separately write the VAT amount in the VAT section of the invoice.