Many of our clients operating in both the goods or services industries recharge costs such as subscriptions, professional fees, travel and subsistence expenses to their customers. We often get asked whether there should be VAT on these charges and often the incorrect rate of VAT is applied.

A disbursement is where a business acts (as an agent) on behalf of their customer in arranging and paying for goods or services. Most importantly, the underlying supply is between the actual supplier and their customer and the invoice should reflect this i.e. the purchase invoice will be made out to their customer and not the agent. Disbursements are outside the scope of VAT and no VAT should be charged on these transactions.