Commentary

V7.433A Disbursements

Part V7 Tax planning
Part V7 Tax planning | Commentary

V7.433A Disbursements

Part V7 Tax planning | Commentary

V7.433A Disbursements

Many clients and advisers are confused about when a charge to a customer is a recharge of expenses (as explained in V7.431 above) or a disbursement arrangement that is not subject to VAT. The key issue to consider is whether the expense belongs to the final customer or if it has been incurred by the business making the charge as part of its own work.

As a simple example, an accountant may complete the annual return for a limited company client at Companies House and pay the £15 annual return filing fee on behalf of the client. If he recharges this £15 to the client (no profit element, recharged at cost), and shows the charge as a separate entry on his sales invoice, then this fee will be a disbursement situation because the expense belongs to the final client. A correct invoice would therefore be raised as follows:

Time charge for completing annual return – £50

Disbursement – annual return filing fee paid to Companies House – £15

VAT

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