Disbursements can be added to invoices without the addition of VAT on top.  However, we regularly identify the overuse of this.  An item is only a disbursement if the cost is actually the customer’s legal responsibility to pay, and you have paid this on their behalf for convenience’s sake.

For example, when CRM invoice for preparation of a Companies House confirmation statement, the £13 filing fee is added as a disbursement, since this is the legal responsibility of the client company to pay this to Companies House.  This is a genuine disbursement.

A common error is to add on travel costs such as train or air fares as a disbursement.  This is incorrect, as the rail operator/airline has contracted with you to provide travel, and you have used this amount as a basis for arriving at your fee charged.  The end customer has is not party to the travel arrangements other than agreeing to be charged the cost and therefore this is not a disbursement and VAT should be added to this cost.  Similarly, postage costs cannot be treated as disbursements as the sender is contracting with Royal Mail not the recipient.

For more information, please see //www.gov.uk/guidance/vat-costs-or-disbursements-passed-to-customers

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