Disbursements: "exempt" or "no VAT"?

Should I treat disbursements as "exempt" or "no VAT" when using Xero

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From Peter Saxton

I have always thought of disbursements as "exempt" but when preparing a VAT return in Xero they are included in box 6.

If I treat them as "no VAT" they don't appear on the VAT return, so thata is what I have done.

Are disbursements "exempt" or "no VAT"?

Replies (6)

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By SXGuy
05th Aug 2019 08:54

Well, a quick google search brings up this link https://www.gov.uk/guidance/vat-costs-or-disbursements-passed-to-customers

which also tells you that "You might be able to leave out these payments from your VAT calculations because it’s the customer, not you, who buys and receives the goods or services; you’re just acting as their agent."

So to leave them out of the VAT calculation, you would treat them as Exempt. Zero rated would be included in box 6. "No VAT" would be the same as exempt from what I can see.

Having said all that, I wouldn't be able to say if they are disbursements or not as im not privy to your info, only you would know that.

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Replying to SXGuy:
By petersaxton
05th Aug 2019 10:01

Thank you.
They are disbursements - I've studied that extensively but I was thinking they were "exempt" until it messed up the VAT return!

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Replying to petersaxton:
RLI
By lionofludesch
05th Aug 2019 10:28

They're not exempt - that would have the potential, at least, to affect your input tax recovery.

Genuine disbursements are, as implied above, outside the scope of VAT as they are not your transactions. The goods or services are supplied to someone else.

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Replying to petersaxton:
RLI
By lionofludesch
05th Aug 2019 10:38

If I might make a suggestion, if I paid, say, a £13 filing fee on a client's behalf, I would post that payment directly to the client's sales ledger account.

Then, when I billed him for the work, I would only make the entry for my fee. The ledger balance would show my fee + the filing fee.

Disbursements are loans, are they not ? We lend the client the money to pay the disbursement and he repays the loan when he pays our bill.

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Replying to lionofludesch:
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By johnhemming
05th Aug 2019 12:20

Where there is no vat paid on an item a computer system should have the options for
a) Zero rated
b) Exempt
c) Outside the scope
d) Domestic Reverse charge
e) EC imports goods
f) EC imports services
g) ROW imports goods
h) ROW imports services.

As far as Disbursments go I would vote for outside the scope.

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By Vile Nortin Naipaan
05th Aug 2019 10:48

Peter, I have a damned good slap that I'm itching to give you.

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