Billable expenses - markup error

I recently upgraded from 19.10.15 -> 19.11.93

Previously entered billable expense entries are now showing incorrect figures - seemingly related to working out the markup figure when calculated with UK flat rate VAT.

19.10.15:

19.11.93:

The custom VAT rate in use is 20% VAT, flat rate scheme 13.5%

In 19.11.93 the “billable expenses - markup” line is being calculated incorrectly - it looks as if it’s 20% of the expense value.

19.10.15: 149.00 * 1.2 = 178.80; 178.80 * 0.135 = 24.14; 178.80 - 24.14 - 149.00 = 5.66
19.11.93: 149.00 * 0.2 = 29.80

I also notice in 19.11.93 that the Billable Expenses tab now doesn’t show expenses that have been written off. I can see they are available on the summary screen, but it was nice having the record in Billable Expenses too.

Your post is not clear, @PepperJack.

  • Your screen shots were not taken from the Billable Expenses tab. Where are they from?
  • Your numerical calculations are not useful for troubleshooting. Where did you get these various numbers? You need to post screen shots of Edit screens for transactions, then screen shots illustrating their impact on accounts (which you must explain). And you must describe what you think any problem is.

Understand that Billable expenses - markup is only reporting increases in amounts invoiced to customers over those paid. It has nothing to do with taxes, except as these affect the amount you paid.

The biggest issue, though, is that billable expenses should not affect your tax liability at all. They are expenses passed through to your customer, not expenses of your business. And their reimbursement is not income for your business. Therefore, tax codes should not be used on billable expenses at all. You should record the expense inclusive of any VAT. If necessary, include separate statements with your sales invoice telling the customer how much VAT is included in those billable expenses.

It is entirely possible, depending on local tax law, that use of billable expenses in some jurisdictions is not even legal. A qualified accountant will have to give you advice about that.

Finally, changes to billable expenses were made at version 19.11.91 that eliminated the old write-off procedure. The relevant Guide was replaced, but the replacement will not post to the Guides web site until later today. The old procedure was actually incorrect from an accounting perspective. Billable expenses were never really written off. They were real, so they needed to either be transferred to an expense account or the resulting sales invoice needed to be written off as a bad debt. That is how the new version works.

The screenshots are taken from clicking on the “Billable Expenses” amount/link on the summary screen, under Assets. Both screenshots are taken from the same area of the software, for the same time period, just different software versions. The 5 lines in both screenshots should be identical. Working from the bottom up, the 149.00 is the expense payment made, the next two lines (EQU011) are the items from the invoice raised to pay for the expense.

is taken from the 19.10.15 screenshot: 149.00 is the bottom entry. The 1.2 relates to 20% VAT, the 0.135 relates to the 13.5% flat rate figure. Finally, the 5.66 is the figure on the entry above the 149.00 figure - the 5.66 expense markup.

is taken from the 19.11.93 screenshot: 149.00 is again the bottom entry, 29.80 is the figure showing as the expenses markup (20%).

My accountant is perfectly fine with the procedure I use. These are expenses I have incurred that my client agreed to pay. They are not disbursements that I purchased on behalf of the client.

As I am VAT registered, I must ensure that VAT is charged on all my billable expenses, even if I did not incur VAT myself.

From the above screenshots, there are examples of:
Train tickets – public transport is zero rated. I charge my client what I paid but l add 20% VAT.
Mileage – as I negotiated a rate of 45p per mile with my client, I charge for the number of mileage times the rate and I add 20% VAT.

This is all in line with HMRC guidance and again, signed off by my accountant. However, at the moment I’m trying to highlight the difference between figures that should be identical, not justifying why the figures are there.

I’m fine with the new write off or bad debt procedure - I was merely highlighting the difference.

Many thanks.

@PepperJack I can reproduce the issue. Can you please check the latest version (19.11.94) ? It should correctly calculate markup now.

@lubos - that looks to have fixed the issue. Many thanks for the speedy turnaround.

@PepperJack, I want to understand what you are doing. From your first post, I thought you were applying your VAT tax code to the billable expense itself when you recorded the purchase as a billable expense. That really plays havoc with things, and could have distorted the markup account. But since you did not show anything about that account, I could not tell.

From post #3 it now sounds like you are applying the VAT tax code on the sales invoice when you bill out the expense to your customer. In other words, you are assessing your VAT on top of something you are selling to the customer, for which you may or may not have paid VAT to your supplier. There is a big difference, obviously.

Can you just confirm exactly how you are handling this?

@Tut - ah, I see…

I am definitely NOT doing this. :arrow_up:

I am doing this. :arrow_up:

Thank you.

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This topic was closed because slight changes to the program make some of the posts obsolete.