Recovery of disbursements
When UCL are supplying goods or services to customers they may also pay certain costs that they pass on when they invoice them, it may be possible to treat these payments as disbursements for VAT purposes. If so, UCL don't charge VAT when the payments are passed on.
If UCL pay suppliers on behalf of their customers and pass on the cost to the customer when invoicing them these payments can be left out of the VAT calculation and treated as disbursements provided:
- UCL paid the supplier on their customer's behalf and acted as the agent of their customer
- UCL's customer received, used or had the benefit of the goods or services UCL paid for on their behalf
- It was UCL's customer's responsibility to pay for the goods or services, not UCL's
- UCL had permission from the customer to make the payment
- UCL's customer knew that the goods or services were from another supplier, not from UCL
- UCL show the costs separately on their invoice
- UCL pass on the exact amount of each cost to their customer when they invoice them
- The goods and services UCL paid for are additional to whatever UCL are billing their customer for doing themselves
Recovery of non-disbursements
There are many incidental costs that UCL might incur that can't be excluded from the VAT calculation when customers are invoiced. Any costs that UCL incurs itself in the course of supplying goods or services to customers are not disbursements for VAT purposes. It is UCL and not the customer who purchases the goods and services which are supplied to and used by UCL's business . UCL will need to charge VAT on these when they are recharged whether or not UCL have paid any VAT or not.
An example of a cost that could be recharged but is not a disbursements is an airline ticket that UCL buys to visit a client or to travel to a job. If UCL recharges the cost to the client VAT must be charged because the flight was for UCL not for the client.
Where VAT is incurred by UCL on a cost which is recharged for example on a meal then the VAT incurred by UCL is recoverable.