Help Centre

Passing costs on to customers

Guidance on passing costs on to customers, the difference between a 'disbursement' and 'recharge', and how to claim back and apply VAT in each case.


Where you act as the agent, your customer purchases and receives the supply. VAT should not be charged when passing the cost on to your customer.

In order to treat a purchase as a disbursement, the following conditions must be met:

  • you acted as an agent i.e. paid for the supply on behalf of the customer
  • your customer is benefiting from the use of the supply
  • the onus was on the customer to pay for the supply
  • the client was aware and permitted you to pay for the supply
  • the client is aware that the supply does not form part of your services

The following conditions must be met when invoicing:

  • the supply is itemised separately on the invoice you raise (it’s a separate cost to your services)
  • the amount you invoice for the supply is the same amount that you paid

Treatment of VAT on purchase:

In this case, the supply was made to your client (you’re just the mediator), so VAT cannot be claimed back here.


These are costs that you have to charge VAT on (whether you paid VAT on it or not), and are costs incurred in order to supply your service to the customer as it’s you that buys and benefits from the use of the service, for example, travel expenses.

Treatment of VAT on purchase:

You can claim VAT back on these costs as they were supplied to you. You need a VAT invoice for complete records. Your client will be able to claim back the VAT on the recharge if they’re also a VAT-registered business.

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