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My client is a sole practitioner solicitor. She has chosen to use the VAT flat rate scheme (FRS). In the course of her work she will often travel to clients or court hearings incurring travel expenses which are charged on to the client. So a £20 train fare for example will be charged to the client at £20 plus VAT. This means that my client makes a slight profit in respect of each expense.
With hindsight I am not sure whether this is the correct treatment but it seemed the most logical method when I first advised her. However now my client has incurred standard-rated disbursements and I am confused as to the correct method for passing the cost on to my client's clients. Suppose a hotel bill comes to £117.50 including VAT. Were my client not subject to FRS I would...
