Supply and consideration ― disbursements and recharges

Produced by a Tolley Value Added Tax expert

Value Added Tax

Guidance

This guidance note examines the topic of disbursements and recharges for VAT purposes.

For an overview of supply and consideration generally, see the Supply and consideration ― overview guidance note.

For in depth commentary on the legislation and case law in this area, see De Voil Indirect Tax Service V3.159.

Disbursements

If certain conditions are met, payments that are made by a business to a third party on behalf of a customer can be excluded when calculating VAT due on the business’ supplies to its customers. These payments are known as disbursements.

In other words, a disbursement is money paid by an agent to a third party on behalf of its client whilst acting as the client’s agent.

By way of example, a business may provide standard-rated services to its customer for £100 (excluding VAT). It may also pay a third party £10 by way of a disbursement on behalf of its customer. The business would charge VAT of £20 (£100 x 20%) on its services but it will not be obliged

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