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Disbursements

Disbursements and tax returns

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I understand about disbursements and how (if they've been invoiced correctly) they do not need to be included in your vatable turnover, however, I have a question about self-assessment tax returns. If a company has say £12,000 worth of disbursements in a tax year, should the full turnover amount be declared (including disbursements) on the SE tax return, and the disbursements treated as costs to be offset, or should they come off to start with?

E.g. 

Turnover including disbursements - £92,000 minus Costs - £12,000 equals total profit - £80,000. 

or should the turnover begin as £80,000. 

I suppose to sum up the question, should all disbursements be disregarded from the accounts completely? 

Many thanks.

Replies (8)

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By johngroganjga
26th Aug 2019 07:14

As it makes no difference to your reported profit, it doesn’t matter.

Thanks (1)
Psycho
By Wilson Philips
26th Aug 2019 09:15

While I agree with John that it makes no difference to the bottom line my view is that the ‘correct’ treatment would be to exclude them. A disbursement, by its nature, is neither an expense nor income of the business.

Taking an unlikely example, say your fees were £12,000 and disbursements £80,000. Do you think that reporting turnover of £92,000 would be an accurate reflection of the trading performance for the year?

Not to mention the potential unnecessary enquiry from HMRC as to why the business is not VAT-registered, if that is the case.

Thanks (1)
Replying to Wilson Philips:
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By pastillemug
26th Aug 2019 09:43

That was what I was thinking - if I had the turnover figure higher than the VAT threshold then I may get an enquiry.

Thank you very much for your response, you've been very helpful.

Thanks (0)
Replying to Wilson Philips:
RLI
By lionofludesch
26th Aug 2019 11:15

Wilson Philips wrote:

While I agree with John that it makes no difference to the bottom line my view is that the ‘correct’ treatment would be to exclude them. A disbursement, by its nature, is neither an expense nor income of the business.

I agree with this. A disbursement is merely a short term loan to your client. You pay a fee (or whatever) for him and he gives you the money back later.

It's not a P+L item. If it's still outstanding at the year end, it's a balance sheet item. Otherwise, it doesn't appear at all.

Thanks (1)
Hallerud at Easter
By DJKL
26th Aug 2019 09:46

Surely for tax one follows the accounts already prepared which will themselves likely have £80,000?

Thanks (0)
Replying to DJKL:
By johngroganjga
26th Aug 2019 12:13

Yes of course, but I am reading the question as one about how to prepare the accounts, although it does of course mention the tax return, which I ignored as coming from the lay person’s lack of understanding of the difference.

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By Rweaver
26th Aug 2019 16:26

My first question would be why is a company filling in self-employment pages of a tax return?

Thanks (1)
Replying to Rweaver:
Psycho
By Wilson Philips
26th Aug 2019 16:35

Because he is a layperson, and is using "company" (incorrectly) to refer to any business form?

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