Showing posts with label recharge. Show all posts
Showing posts with label recharge. Show all posts

Thursday, November 22, 2012

Recharge vs. Disbursement

When you pass on costs onto clients, it is important to understand if those costs should be treated as a recharge or a disbursement. Their VAT treatment is indeed quite different.

Disbursements

In this situation it's the customer, not you, who buys and receives the goods or services - you're acting as their agent. Before you treat a payment as a disbursement for VAT purposes, you'll need to make sure all of the following apply:
  • you paid the supplier on your customer's behalf 
  • your customer received or had the benefit of the goods or services (this condition usually prevents the agent’s own travelling and subsistence expenses, phone bills, postage, and other costs being treated as disbursements for VAT purposes)
  • it was your customer's responsibility to pay for products
  • your customer knew that those products were from another supplier
  • you show the costs separately on your invoice
  • you pass on the exact amount of each cost to your customer
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. In that case you can pass on those costs as is, without adding any VAT.