Disbursement and Reimbursement Conundrum for VAT

id : 112 Value Added Tax   
posted by : Admin
 DOQ : 2023-06-22 20:51:00

Knowing the difference is important in getting the right VAT treatment

The difference between reimbursement and disbursement is significant from the VAT point of view as reimbursements are subject to VAT, while disbursements are outside the scope of VAT.

If a business is trading very close to the VAT registration threshold, an incorrect classification of expenses could mean that the VAT registration threshold is breached sooner than anticipated.

Disbursements may be defined as ‘a payment made to suppliers on behalf of your customers’.


you paid the supplier on your client’s behalf and acted as the agent of your client.

your client received, used or had the benefit of the goods or services you paid for on their behalf

it was your client’s responsibility to pay for the goods or services, not yours

you had permission from your client to make the payment

your client 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 client when you invoice them

the goods and services you paid for are in addition to the cost of your own services.’

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