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Michael Paul Accountants

VAT on Recharged Expenses

28th October 2014

If you are operating a VAT registered business you will normally add VAT at the applicable rate to any sales you make.  However if you are merely passing on costs that were actually those of your customer (i.e. you paid them on their behalf) then these are classed as disbursements and you shouldn’t charge VAT.

You can only treat costs as disbursements where your customer has received, used or had benefit from the purchase and:

  • They knew you were paying for something from another supplier and not you
  • They agreed to meet the cost
  • The disbursements are itemised on your invoice
  • You pass on the cost and no more (i.e. you do not add a profit element)
  • The disbursements are additional to the supply you are making.

If  you have any questions regarding any accounting or taxation matters then please don’t hesitate to get in touch with us.  We are an  ACCA registered accountancy practice located in the Northamptonshire village of Lamport. From Michael Paul Accountants Northampton, Kettering, Market Harborough and Corby are all within easy reach.

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