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Disbursements

Archived Directive 2006/112/EC (that is, the VAT Directive as it stood at Brexit IP completion day¹, and from which UK valuation legislation was derived) provides that the 'taxable amount' (ie value) must not include amounts received by taxable persons from their customers as repayment of expenditure incurred in the name and on behalf of the customers and which are entered in their books in a suspense account². This provision is not reflected in the UK legislation but apparently had 'direct effect'.

HMRC allows payments to third parties to be treated as disbursements if specified conditions are met. Where this is so, the amounts concerned are excluded when calculating the tax due on traders' supplies to their clients³.

In considering agency supplies, it is necessary to distinguish between disbursements proper and certain charges, which are sometimes described as such. A 'disbursement' is simply money paid by agents to another party on behalf of their clients, while acting as the clients' agents.

HMRC allows persons to treat a payment to a third