What is the difference between a disbursement and recharging an expense?

A disbursement is a payment made as an agent on your customer’s behalf that meets HMRC’s conditions. Recharging your own cost is different and normally forms part of your supply. Passing on the exact amount does not automatically make it a disbursement.

These answers provide general information, not advice tailored to your circumstances. Rules can change and exceptions may apply — speak to the CASS team before making a tax, accounting or financial decision.

Who received the supply?

For a disbursement, your customer must receive the goods or services and be responsible for paying the supplier. You pay on their behalf with their permission, rather than buying something for your own business.

The conditions matter

The amount must be separately identified, passed on without a markup and supported by records. You cannot reclaim VAT on that payment while treating it as a disbursement.

Your own costs are different

Travel you incur to deliver your service is generally your expense. Recharging it normally follows the VAT treatment of your supply, even if the original cost had no VAT.

Check the arrangement

Send CASS the agreement and supplier invoice before deciding. The invoice label alone does not determine the correct treatment.