HM Revenue & Customs (henceforth HMRC) considers a disbursement for VAT purposes to be a payment made to a third party by a supplier on behalf of a client, as the client’s agent. Any payments made to third parties on behalf of a client can be treated as disbursements for VAT purposes.
Therefore a solicitor does not charge VAT when billing a client for that item.
To qualify as a disbursement, the following criteria must be met:
However, costs incurred by suppliers/solicitors in the course of making their own supply to the client cannot be treated as disbursements. These must be included in the value of those supplies when VAT is calculated.
Costs that can be treated as disbursements for VAT purposes include:
The solicitor must consider who received the benefit of the services provided to decide whether expenditure on such services qualifies as a disbursement for VAT purposes.
An invoice for an interpreter can be a disbursement if:
An invoice for a translator cannot be a disbursement if the translation was commissioned to enable the solicitor to understand a document and advise their client accordingly: the client did not directly receive the benefit of the supply.