Disbursements and VAT

Disbursements and VAT

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My client is a wholesaler in the UK who goes to Trade Shows in the UK.
As well as their own range, they are stocking a brand from Peru.

The Show organiser invoices my UK client for £2500 + VAT = £2937.50

The lady in Peru pays my client £2937.50 to cover the cost of advertising her brand at the stall.

It is my understanding of VAT notice 700 section 25 that this could count as a disbursement and thus be outside the scope of charging VAT to the Peru lady.

It is also my understanding that therefore, my client can't claim back the VAT charged on the 2500 for the stall.
However, the Show organiser is just invoicing my client for the whole event (5000+VAT, i.e. the peru stall and their own stall) and invoices them in installments. As far as the Show organisers are concerned, they aren't aware of any arrangement with the lady in Peru.

My client (understandably) wants to receive money from his Peru client gross, AND reclaim all the VAT on the amounts he is invoiced.

Can he do this?
I'm too confused this morning to work it out!

Thank you

Confused

Replies (2)

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By theaardvark
05th Sep 2007 14:15

Not a disbursement
The supply in question is not a disbursement. It is a recharge which your client purchases and supplies onward (the show organiser makes no supply to the lady in Peru).

As such, your Client can charge whatever he chooses. As advertising services supplied to someone outside the EU, he need not account for VAT on the charge he makes. However, he is entitled to recover the VAT on the purchase cost.

Regards,

Paul Taylor
Senior VAT Consultant
Dains

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By AnonymousUser
05th Sep 2007 14:56

Paul
Thank you, my client will be pleased to hear that.

As usual the advice I got from HMRC was somewhat useless, pointing me to disbursements, so thank you for your straightforward response!

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