One of the most common mistakes I have seen in preparing VAT is that business the VAT treatment on disbursements.
A lot of businesses add recharged expenses to an sales invoice. This could be something as simple as post and packing or it could be a recharged airfare on a consultancy contract. Both of these expenses do not have VAT charged on them when you buy them from the original supplier.
Naturally, businesses think that when they recharge the expense, they should not charge VAT on these items to their customer. I am afraid that this is wrong!!!
Once something is a recharged as a disbursement it must be charged to the customer including using the VAT rate that applies to the mains supply of goods or services.
Unfortunately, once this error is discovered is normally too late for the business to go back to the customer to ask for the VAT so the business will have to bear the cost of the mistake.
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