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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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.
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 ..........
Agree with 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
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.
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.
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.
I didn't pick up on this
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
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.
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.
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.