VAT Rules On Reimbursement And Disbursement Of Expenses

1. Disbursement – Out of scope for VAT

• Where you have acted as an agent, the recovery would generally amount to a disbursement.
• A disbursement does not constitute a supply and is, therefore, not subject to VAT.
• Disbursement is a payment that your business makes on behalf of a client but which you later invoice the client for.

2. Reimbursement – within in the scope of VAT

• Where you have acted as a principal, the recovery would generally amount to a reimbursement.
• A reimbursement is considered to be a part of consideration for the supply and follows the same VAT treatment as the main supply.

Source Spectrumaccounts

See also VAT Public Clarifications on recovery of expenses and financial options

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