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Recovery of disbursements

When Â鶹´«Ã½ÊÓƵÍøÕ¾ 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, Â鶹´«Ã½ÊÓƵÍøÕ¾ don't charge VAT when the payments are passed on.

If Â鶹´«Ã½ÊÓƵÍøÕ¾ 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:

• Â鶹´«Ã½ÊÓƵÍøÕ¾ paid the supplier on their customer's behalf and acted as the agent of their customer
• Â鶹´«Ã½ÊÓƵÍøÕ¾'s customer received, used or had the benefit of the goods or services Â鶹´«Ã½ÊÓƵÍøÕ¾ paid for on their behalf
• It was Â鶹´«Ã½ÊÓƵÍøÕ¾'s customer's responsibility to pay for the goods or services, not Â鶹´«Ã½ÊÓƵÍøÕ¾'s
• Â鶹´«Ã½ÊÓƵÍøÕ¾ had permission from the customer to make the payment
• Â鶹´«Ã½ÊÓƵÍøÕ¾'s customer knew that the goods or services were from another supplier, not from Â鶹´«Ã½ÊÓƵÍøÕ¾
• Â鶹´«Ã½ÊÓƵÍøÕ¾ show the costs separately on their invoice
• Â鶹´«Ã½ÊÓƵÍøÕ¾ pass on the exact amount of each cost to their customer when they invoice them
• The goods and services Â鶹´«Ã½ÊÓƵÍøÕ¾ paid for are additional to whatever Â鶹´«Ã½ÊÓƵÍøÕ¾ are billing their customer for doing themselves

Recovery of non-disbursements

There are many incidental costs that Â鶹´«Ã½ÊÓƵÍøÕ¾ might incur that can't be excluded from the VAT calculation when customers are invoiced. Any costs that Â鶹´«Ã½ÊÓƵÍøÕ¾ incurs itself in the course of supplying goods or services to customers are not disbursements for VAT purposes. It is Â鶹´«Ã½ÊÓƵÍøÕ¾ and not the customer who purchases the goods and services which are supplied to and used by Â鶹´«Ã½ÊÓƵÍøÕ¾'s business . Â鶹´«Ã½ÊÓƵÍøÕ¾ will need to charge VAT on these when they are recharged whether or not Â鶹´«Ã½ÊÓƵÍøÕ¾ 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 Â鶹´«Ã½ÊÓƵÍøÕ¾ buys to visit a client or to travel to a job. If Â鶹´«Ã½ÊÓƵÍøÕ¾ recharges the cost to the client VAT must be charged because the flight was for Â鶹´«Ã½ÊÓƵÍøÕ¾ not for the client.

Where VAT is incurred by Â鶹´«Ã½ÊÓƵÍøÕ¾ on a cost which is recharged for example on a meal then the VAT incurred by Â鶹´«Ã½ÊÓƵÍøÕ¾ is recoverable.