Disbursements for Solicitors

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:

  • The solicitor acted as the agent of their client when they paid the third party.
  • The solicitor charged their client the precise amounts they paid out, eg without any mark-up for profit.
  • The client authorised the solicitor to make the payment on their behalf.
  • The client knew that the goods or services would be provided by a third party.
  • The client actually received and used the goods or services provided by the third party.
  • The client was responsible for paying the third party, eg estate duty or stamp duty.
  • The item was separately itemised when the solicitor invoiced the client.

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:

  • medical fees, reports, records, expert opinions, surveyor's fees
  • expert services, such as an interpreter or a translation

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.

Translation and Interpreting Disbursements for Solicitors

An invoice for an interpreter can be a disbursement if:

  • The interpreter is needed so that the client can communicate with the solicitor, or for them to understand court proceedings. Here, the supply will be to the client
  • The solicitor receives an invoice from the interpreter/translator/translation agency

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.