Consultancy Fees

This Overheads code records the cost of consultancy fees incurred in running the business. As an expense account, it normally carries a debit balance: debit entries increase the balance (recording new costs) and credit entries decrease it (for example, correcting an error or a refund received).

Real-world examples

Manufacturer hiring a UK-based consultant

Bringing in an operations consultant for a factory efficiency review, invoiced normally by a UK supplier. £1,110 (£925 net of VAT) is a debit of £925 to 7603 (Consultancy Fees), a debit of £185 to 2201 (Purchase Tax Control Account), and a credit of £1,110 to 2100 (Creditors Control Account) — the standard treatment.

Tech business hiring an overseas consultant

Engaging a US-based growth or strategy specialist for a one-off project works differently. Under the B2B place-of-supply rule, the service is treated as supplied where the UK customer belongs, so the overseas consultant charges no VAT — instead the UK business self-accounts for VAT under the reverse charge, declaring the same amount as both output tax and input tax on its own VAT return. On a £5,000 fee that's a debit of £5,000 to 7603 and a credit of £5,000 to 2100 for the net cost, with the reverse-charge VAT declared separately rather than added to the supplier's invoice — it nets to zero cost but both sides still have to be reported.

Commonly confused with

Because code 7602 (Accountancy Fees) sits right next to this one in Overheads, it's a common mis-posting target. Code 7603 is specifically for consultancy fees, while 7602 covers accountancy fees — similar in nature, but keeping them separate is what makes the overheads section of your management accounts meaningful rather than a single lumped total.

What a mis-posting here costs you

An error posting to Consultancy Fees won't change total overhead spend, but it will distort the overheads breakdown that's usually reviewed line by line each month to spot cost creep.

Other codes in Overheads