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Recovery of disbursements

When Ïã¸ÛÁùºÏ²ÊÖÐÌØÍø are supplying goods or services to customers they may also pay certain costs that they pass on when they invoice them, it may be possible to treat these payments as disbursements for VAT purposes. If so, Ïã¸ÛÁùºÏ²ÊÖÐÌØÍø don't charge VAT when the payments are passed on.

If Ïã¸ÛÁùºÏ²ÊÖÐÌØÍø pay suppliers on behalf of their customers and pass on the cost to the customer when invoicing them these payments can be left out of the VAT calculation and treated as disbursements provided:

• Ïã¸ÛÁùºÏ²ÊÖÐÌØÍø paid the supplier on their customer's behalf and acted as the agent of their customer
• Ïã¸ÛÁùºÏ²ÊÖÐÌØÍø's customer received, used or had the benefit of the goods or services Ïã¸ÛÁùºÏ²ÊÖÐÌØÍø paid for on their behalf
• It was Ïã¸ÛÁùºÏ²ÊÖÐÌØÍø's customer's responsibility to pay for the goods or services, not Ïã¸ÛÁùºÏ²ÊÖÐÌØÍø's
• Ïã¸ÛÁùºÏ²ÊÖÐÌØÍø had permission from the customer to make the payment
• Ïã¸ÛÁùºÏ²ÊÖÐÌØÍø's customer knew that the goods or services were from another supplier, not from Ïã¸ÛÁùºÏ²ÊÖÐÌØÍø
• Ïã¸ÛÁùºÏ²ÊÖÐÌØÍø show the costs separately on their invoice
• Ïã¸ÛÁùºÏ²ÊÖÐÌØÍø pass on the exact amount of each cost to their customer when they invoice them
• The goods and services Ïã¸ÛÁùºÏ²ÊÖÐÌØÍø paid for are additional to whatever Ïã¸ÛÁùºÏ²ÊÖÐÌØÍø are billing their customer for doing themselves

Recovery of non-disbursements

There are many incidental costs that Ïã¸ÛÁùºÏ²ÊÖÐÌØÍø might incur that can't be excluded from the VAT calculation when customers are invoiced. Any costs that Ïã¸ÛÁùºÏ²ÊÖÐÌØÍø incurs itself in the course of supplying goods or services to customers are not disbursements for VAT purposes. It is Ïã¸ÛÁùºÏ²ÊÖÐÌØÍø and not the customer who purchases the goods and services which are supplied to and used by Ïã¸ÛÁùºÏ²ÊÖÐÌØÍø's business . Ïã¸ÛÁùºÏ²ÊÖÐÌØÍø will need to charge VAT on these when they are recharged whether or not Ïã¸ÛÁùºÏ²ÊÖÐÌØÍø have paid any VAT or not.

An example of a cost that could be recharged but is not a disbursements is an airline ticket that Ïã¸ÛÁùºÏ²ÊÖÐÌØÍø buys to visit a client or to travel to a job. If Ïã¸ÛÁùºÏ²ÊÖÐÌØÍø recharges the cost to the client VAT must be charged because the flight was for Ïã¸ÛÁùºÏ²ÊÖÐÌØÍø not for the client.

Where VAT is incurred by Ïã¸ÛÁùºÏ²ÊÖÐÌØÍø on a cost which is recharged for example on a meal then the VAT incurred by Ïã¸ÛÁùºÏ²ÊÖÐÌØÍø is recoverable.