recharge invoice or reimbursement

recharge invoice or reimbursement

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our practice paid £300 to Foreign Office to have some documents legalised for a client. should we issue a recharge invoice to the client and put the income & expense through the P&L or is it a reimbursement of a disbursement and gets treated as a client account transaction?

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Euan's picture
By Euan MacLennan
16th Sep 2015 18:10

Sounds like a disbursement

... but your client account is not involved.  If you have paid the £300 out of your practice bank account, just raise an invoice to the client for the disbursement and when he pays you the £300, pay it into your practice account.

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RLI
By lionofludesch
16th Sep 2015 19:14

Disbursement for me too.

I'm taking it that the service was supplied to your client and you paid for it.   If it was you, rather than your client, who wanted the documents verified, I'd say it wasn't a disbursement.

If you'd care to provide the details ..........

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By nick farrow
17th Sep 2015 09:58

many thanks Euan & Lion

it was definitely the client who wanted and needed the documents legalised - they had already been notarised and that fee went in and out of my clients account (so no impact on P&L)

However in this instance I had to pay online immediately so couldn't get the client advance the cash  to my clients account

my issue I suppose is ifi have to invoice then (were he not overseas) I would have to charge VAT and presumably put through my P&L

the issue is almost identical where we pay & recharge companies house annual return fees - we don't charge VAT on the grounds that is not our service but the client's legal obligation - but we put the income & cost though p&l which may not be correct but p&l neutral

 

 

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Replying to Piltdown Man:
Euan's picture
By Euan MacLennan
17th Sep 2015 11:39

Agree with Lion

nick farrow wrote:

it was definitely the client who wanted and needed the documents legalised - they had already been notarised and that fee went in and out of my clients account (so no impact on P&L)

However in this instance I had to pay online immediately so couldn't get the client advance the cash  to my clients account

This seems contradictory - or are you saying that you used part of some other client's money in your client account to pay the fee out of your client account and that this was subsequently reimbursed by the client in question paying into your client account?  If so, I think you have misused your client account.

nick farrow wrote:

my issue I suppose is ifi have to invoice then (were he not overseas) I would have to charge VAT and presumably put through my P&L

It does not follow that if you raise an invoice, you have to charge VAT.  If it makes you feel more comfortable, call it a payment request or just write a letter.

nick farrow wrote:

the issue is almost identical where we pay & recharge companies house annual return fees - we don't charge VAT on the grounds that is not our service but the client's legal obligation - but we put the income & cost though p&l which may not be correct but p&l neutral

Your accounting treatment is illogical.  A disbursement for a client cannot be treated as your own expense, nor can its recharge be treated as your income.

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Replying to Tosie:
RLI
By lionofludesch
17th Sep 2015 11:55

I didn't pick up on this

Euan MacLennan wrote:

nick farrow wrote:

it was definitely the client who wanted and needed the documents legalised - they had already been notarised and that fee went in and out of my clients account (so no impact on P&L)

However in this instance I had to pay online immediately so couldn't get the client advance the cash  to my clients account

This seems contradictory - or are you saying that you used part of some other client's money in your client account to pay the fee out of your client account and that this was subsequently reimbursed by the client in question paying into your client account?  If so, I think you have misused your client account.

The idea of a clients' account is that their money is kept separately from yours so that they can always recover it.  They're not allowed overdrafts.

If you made a disbursement for one of your clients, you should have financed it from your own funds, not those of your other clients.

As it happens, no harm done - but what if you hadn't recovered the disbursement ?

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Replying to Silver Birch Accts:
paddle steamer
By DJKL
17th Sep 2015 21:10

Surely a float

lionofludesch wrote:

Euan MacLennan wrote:

nick farrow wrote:

it was definitely the client who wanted and needed the documents legalised - they had already been notarised and that fee went in and out of my clients account (so no impact on P&L)

However in this instance I had to pay online immediately so couldn't get the client advance the cash  to my clients account

This seems contradictory - or are you saying that you used part of some other client's money in your client account to pay the fee out of your client account and that this was subsequently reimbursed by the client in question paying into your client account?  If so, I think you have misused your client account.

The idea of a clients' account is that their money is kept separately from yours so that they can always recover it.  They're not allowed overdrafts.

If you made a disbursement for one of your clients, you should have financed it from your own funds, not those of your other clients.

As it happens, no harm done - but what if you hadn't recovered the disbursement ?

Surely a float of firm money is carried on client account to cover such outlays, otherwise say a bank charge on client account would throw you into problems if not capable of allocation to a particular client.

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RLI
By lionofludesch
17th Sep 2015 10:11

Turnover

But it does increase your turnover and make your business look bigger than it is.

At £13 a throw, probably not a big deal in your case but one can envisage situations where it is.

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By nick farrow
17th Sep 2015 18:01

many thanks for your clarifications Euan & Lion

I think the upshot is that all disbursements and reimbursements  (on annual return fees notaries legalisation etc) should ideally not touch the P&L even if net effect nil

 

 

 

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By North East Accountant
18th Sep 2015 09:00

Accounts Treatment incorrect

Disbursements should not be included in our own P & L account, to do so is incorrect as they are not our expense.

Bank charges easily sorted. Our bank debits clients accounts bank charges to our practice account.

 

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