Invoice Confusion - B2B

ironclaw

Hi All,

I'll be open and say that VAT and its application has always confused me, so if anyone can help me understand this I'd be very appreciated. I'm probably way overthinking this.

Assume I am an LTD who has a client, both of us have VAT numbers. The client is on a retainer for say €500 per month (The amount is not broken down on the invoice, it's a flat 500EUR)

Of that €500, assume €250 is service fee's and €250 is spent on advertising by my Ltd with companies that charge my Ltd VAT e.g. facebook Ads etc.

How do we invoice the client correctly? I assume that we simply take the 500EUR and add on 23%?

My questions are:

- Does it make a difference that half the invoice is a service? Does the same rate of 23% still apply?

- Does it make a difference that we have already paid VAT to the advertising platforms? For whatever reason, I'm thinking its 'double taxation' if we are being charged VAT by the advertising platform and then adding more VAT to the client.

Again, this is probably trivial but I can't get my head straight on it.

Buttercake

The client is on a retainer for say €500 per month (The amount is not broken down on the invoice, it's a flat 500EUR)

It should be displayed, You are charging them €406.50+23% vat. VAT = -€93.50

Of that €406.50, assume €250 is service fee's and €250 is spent on advertising by my Ltd with companies that charge my Ltd VAT e.g. facebook Ads etc.

Out of the €406.50 - take out €250 for your company service fee, you are left with €156.50 to spend on Facebook. Say you spend €156.50 on FB ads VAT = +€29.26

With this example, you will have to pay Revenue €64.24.

IF you want your client to get €250 worth of Advertising and you to get your €250 service fee, you would have to charge a Retainer of €615.

Does it make a difference that half the invoice is a service? Does the same rate of 23% still apply?

No and Yes, the standard vat rate is 23% for the services you are providing.

Does it make a difference that we have already paid VAT to the advertising platforms?

No, You claim the VAT you pay to them back with your returns.

ironclaw

Thank you Buttercake, I appreciate the breakdown and time you took to write it. I may loop back with more questions but I think I'm clear for now.

The only 'gotcha' is my last part in my opening message. We are effectively paying the Ad bill of the client i.e. They used pay 250EUR directly to facebook, we now pay it on their behalf (For a number of reasons) Hence, how does that work? We couldn't charge them 250EUR + VAT or they may aswell just go to fb direct and pay them 250EUR (Which includes VAT already)

@adrianw, I got your PM but I can't reply as your inbox is full.

Buttercake

ironclaw wrote: »

We couldn't charge them 250EUR + VAT or they may aswell just go to fb direct and pay them 250EUR (Which includes VAT.

The best way to think about it is, if your client wants €250 worth of ads they can:

1. Pay Facebook €250+vat
2. Pay you €250+vat, then you pay Facebook €250+vat

So you would charge them €250 for service + €250 for ads spend + vat = €615



I think you should operate on a plus vat basis because it sounds like your client might be playing tricks on you!

rolion

I stand to be corrected but all prices / quotes Business2Business are been assumed quoted ex VAT opposite to end users where you will need to specify or include it in the final price.
I give quotes in price ex and just split and add the total at the end.
Now,be careful that some services are VAT at 13.5% according to Revenue,if you want to reduce your liability at the end of the month.