VAT Disbursements

What are disbursements?

Disbursements are payments you make on behalf of your customers for goods or services received and used by them. They are central to understanding VAT on disbursements and ensuring accurate accounting

For example, in building work, you purchase and pay for the materials of a renovation.

When You Can Claim VAT Back

If you are a VAT registered business and you claimed back the VAT on the disbursements costs (costs you passed onto your customers), you can charge VAT on these costs to your customers but only if they goods or services were supplied to your business and not your customers.

But remember, in order to claim the VAT back on a purchase, you must have an invoice from the supplier containing a VAT registration number and a breakdown of the VAT element. Our guide to VAT and disbursements provides further clarity on these requirements.

When You Cannot Claim VAT Back

Your customer may also be unable to claim back the VAT if they don’t have a valid VAT invoice for goods or services. This is where HMRC guidance on HMRC VAT disbursements becomes essential

What Isn’t A Disbursement?

Goods or services purchased and used by you in the course of supplying business to your customers are not disbursements for VAT purposes. Meaning, you must charge VAT on these costs to your customer weather those costs included VAT or not. These costs are known as recharges.

Examples of such recharges could be:

• travel – train, bus, mileage, flight

• postage

• bank fees incurred when transferring money from your business account to the client account.