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I have a plumber do some work for me recently, and in the invoice he included the parking cost. This was for on-street parking, which I know has no VAT applied to it as it is a direct payment to the local council. However, in the invoice, the parking cost paid by the plumber was added to the total charge for labour, before adding 20% VAT to the total price.

Is this incorrect? Should the cost of parking actually be included after adding VAT to only the labour?

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The way VAT works is that you pay the tax on the whole value of the services and goods, and the provider pays the difference between what they paid and what they got from you to the tax agency. So while the provider didn't pay any VAT on the parking, it was part of the service provided to you, so VAT applies.

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    I'd want to see a lawyer's opinion on that. Parking isn't a service provided to the customer, and could reasonably be argued shouldn't be charged anyway. if it's an expense, then the customer only needs to reimburse what the plumber paid. But the reality of course is that the time I've spent writing this comment is already worth more than the amount of money involved.
    – DJClayworth
    Commented Aug 30, 2016 at 15:08

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