Reimbursed expenses

Could someone please set me straight on this situation:

A partner retires and becomes a consultant in the same firm. He still takes clients (of the firm) out and is reimbursed for this expenditure. He invoices the firm for his consultancy fee (inc VAT as the fee is over the registration level). The claim for the reimbursed expenditure is included on the invoice plus VAT. The firm posts the entertaining to the entertaining ledgers and ultimately disallows it in the tax comp. The consultant treats the reimbursed expenditure as part of his turnover and the cost as "cost of goods for sale" (for want of a better place to include it), nothing is disallowed in his computation, so he is effectively taxed on his consultancy fee only.

Is this the correct treatment? My reasoning is that the consultant is incurring expenditure on behalf of the firm, the firm is therefore incuring the cost and disallowable from its point of view. If the consultant incurred the cost on his own behalf then of course the firm would not reimburse it and he would have to disallow it in his tax comp. I have always assumed that this was the correct treatment but a recent comment by someone has led to me to doubt myself.

Thanks