Expenses charged to your clients – for VAT purposes, HMRC rules on disbursements

Written by OZKAN Accountants

If you are reimbursed expenses from your client, the receipt is VAT applicable unless the expense meets the following rules from HMRC;

‘Before you treat a payment as a disbursement(no VAT applied), you’ll need to make sure all of the following apply:

  • you paid the supplier on your customer’s behalf and acted as the agent of your customer
  • your customer received, used or had the benefit of the goods or services you paid for on their behalf
  • it was your customer’s responsibility to pay for the goods or services, not yours
  • you had permission from your customer to make the payment
  • your customer knew that the goods or services were from another supplier, not from you
  • you show the costs separately on your invoice
  • you pass on the exact amount of each cost to your customer when you invoice them
  • the goods and services you paid for are additional to whatever you’re billing your customer for doing yourself

An example of this would be the purchase of a computer system on behalf of a client following a consultation in IT requirements.

It’s usually only an advantage to treat a payment as a disbursement for VAT purposes if the supplier didn’t charge VAT on it, or if your customer can’t reclaim the VAT.’



FreeAgent , HMRC , Limited Company , Sole Trader , VAT