The area of what is a VATable expense and what is a disbursement has caused businesses a lot of confusion over the years as an examination of the Tribunal records will confirm.
What is a disbursement?
A disbursement is a sum of money which is paid on behalf of someone else for a supply which they receive. A disbursement is treated as outside the scope of VAT.
HMRC says that, to qualify as a disbursement for VAT, a payment must meet all the following conditions. It must be:
- for goods or services received and used by the client, not by the adviser, and which are clearly additional to those supplied by them
- shown separately on the adviser’s invoice as the exact sum paid out
- paid as the agent on behalf of
