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Identifying whether a business raising a sales invoice is recharging its own expenses or those of a client
What is the difference between a recharge of expenses and a disbursement? It sounds a simple question; however in the world of tax a simple question does not always mean that we arrive at a simple answer.
I will try to refute that statement in this article. This is motivated by something that a little bird told me on the grapevine which is that a big business in the UK (one that cannot claim input tax by the way) has been advising VAT-registered subcontractors not to charge VAT on their travel expenses because they relate to a disbursement rather than a supply of services. Are they correct? Read on.
The basic rules
If we go back to the legislation on VAT the definition of this great tax is contained in VATA 1994 s 4 where it is described as a tax “on...
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