Rochford Accountants, Trueman Brown, are a small firms of accountants who believe in keeping their clients up-to date with the latest developments.

A common query that we receive from our clients is the VAT treatment of recharge expenses and disbursements.

Section 25 of the VAT Notice 700 sets out the conditions that must be met if a recharge has to meet if it is to qualify as a disbursement and, therefore, be outside the scope of VAT:-

  • The trader acted as the agent of their client when they paid the third party; and
  • The client must actually receive and use the goods or services provided by the third party; and
  • The client was responsible for paying the third party; and
  • The client authorised the trader to make the payment on their behalf; and
  • The client knew that the goods or services that the trader paid for would be provided by a third party; and
  • The trader’s outlay will be separately itemised when they invoice their client; and
  • The trader will only recover from the client the exact amount paid to the third party; and
  • The goods or services, which the trader paid for, are clearly additional to the supplies which the client makes to the client on their own account.

The main error we spot is where a trader attempts to pass on their own costs,  such a mileage allowance, postage, phone bills and other costs as disbursements to their clients and, therefore, not charge VAT to their client. Such costs fall foul of the condition that the client has not actually received and used the goods or services provided by a third party.

If you need any further advice then please contact us here.

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