VAT for billable extras

Last updated: June 4, 2026

Overview

Billable extras are one-off charges that can be added to a booking and invoiced to a funder through a billing contract subscription. Examples include equipment purchases, transport costs, or any ad-hoc expense that sits outside regular care fees.

When a billable extra is created in Found, the system automatically calculates and stores the VAT breakdown — net amount, VAT amount, and gross amount — at the point of creation. This calculation is driven by the expense type assigned to the extra, which controls how VAT is applied.

How VAT is determined

VAT treatment for a billable extra depends on two settings configured on the expense type:

Tax status

  • Taxable — VAT applies at the rate defined on the expense type.

  • Exempt — No VAT is applied. The price entered is treated as both the net and gross amount.

Price entry mode

  • Exclusive (default) — You enter the net price. VAT is calculated on top and added to give the gross amount. For example, entering £100 at 20% VAT gives a gross of £120.

  • Inclusive — You enter the gross price. VAT is backed out of the total. For example, entering £120 at 20% VAT gives a net of £100 and VAT of £20.

Time-effective tax rates

Expense types support tax rates that change over time. When a billable extra is created, the system matches the tax rate to the purchase date of the expense — not the date of creation. This ensures the correct rate is applied if a rate change has occurred.

VAT amounts stored at creation

All amounts (net, VAT, and gross) are calculated and stored when the billable extra is saved. They are not recalculated later. If the price or tax rate needs to change, the extra can be edited — but only while it has not yet been invoiced. Once a billable extra is linked to an invoice it becomes locked and cannot be modified.

Frequently asked questions

Q: Where does the VAT rate come from? A: The VAT rate is set on the expense type assigned to the billable extra. Expense types can have multiple rates with effective dates, and the system automatically applies the rate that was in effect on the purchase date of the extra.

Q: What is the difference between tax-exclusive and tax-inclusive pricing? A: With tax-exclusive pricing (the default), you enter the net price and VAT is added on top to produce the gross. With tax-inclusive pricing, you enter the gross price and VAT is calculated backwards out of it. The mode is controlled by the expense type configuration.

Q: Can I change the VAT amount on a billable extra after saving it? A: You can edit the price or tax rate on a billable extra while it is in a pending or scheduled status. The system will recalculate the VAT breakdown when you save. Once the extra has been invoiced (status: complete), it is locked and cannot be changed.

Q: What happens if an expense type is tax-exempt? A: No VAT is calculated. The price you enter is treated as the net amount, VAT is set to zero, and the gross equals the net. The extra is invoiced without any tax line.

Q: How do I know if a billable extra has been invoiced? A: The status of the extra changes to complete once it has been included in an invoice. At that point it is linked to an invoice line item and can no longer be edited.

Q: Can a subscription collect billable extras automatically? A: Yes. A billing contract subscription can be configured to collect billable extras by enabling the "collects billable extras" flag. When this is active, all pending extras for the funder's bookings are picked up and attached to the next invoice generated for that subscription.

Q: Why does Found store the VAT amounts rather than recalculating them? A: Amounts are stored at creation to ensure accuracy and consistency. If tax rates change in future, the original calculation for each extra remains unchanged. This also ensures the invoice always reflects what was agreed at the time the expense was recorded.

Q: What is a nominal code and why does it appear on invoice line items? A: A nominal code is a reference used in general ledger accounting to categorise the type of expenditure. It is inherited from the expense type and appears on the invoice line item so that exports to accounting systems can be posted to the correct account automatically.