How to Record VAT when claiming Expenses?

Being a VAT Registered Business, You must ensure that VAT is charged on all your billable expenses, even if you did not incur VAT yourself.

Please see below the  some common examples of expenses and their typical treatment of VAT when billing a client:

  • Hotel Stays – normally a standard rate VAT. You bill your client exactly what you paid which includes VAT.  Say you paid £100 plus vat (£120 inclusive of VAT). The same amount should be added to the invoice, No additional VAT should be charged as £120 already includes the VAT amount that you paid to the hotel)
  • Train tickets – public transport is zero rated. You charge your client what you paid, but you will add 20% VAT.
  • Flights – VAT can be complicated on flights, but generally they are zero rated. You charge your client what you paid, but you will add 20% VAT.
  • Mileage – if you’ve negotiated a rate of 45p per mile with your client, you will charge for the number of mileage times the rate and you’ll add 20% VAT.

In general VAT must always be charged, but you must not charge VAT on top of VAT (e.g. in hotel example above, your gross bill should be £120.00).

In a nutshell,  If you didn’t incur VAT on the expense ( such as train, Flights), you charge VAT. But If you incurred VAT on the expense (e.g. hotels), you don’t charge VAT again, you will charge £120 as gross amount which includes vat.


The invoice issued by your company was for £10,000 net and also incurred hotel costs of £120 (including VAT), Train ticket £50, which your client has agreed to reimburse your company.

Work done: £10,000

Expenses: £150 (£100 for the hotel (£120 total hotel costs less 20% VAT), plus £50 train ticket)

Net Invoice: £10,150

VAT at 20%: £2,030 (£2,000 VAT on work done and £30 on hotel expenses & train ticket)

Gross Invoice: £12,180

Should you have any question, Please get in touch with us on 0203 441 258 or

in General InformationLimited CompanyVAT – Value Added Tax

Related Articles