Client is a patent specialist and prepares and applies for patents to various national and international bodies on behalf of their clients.
My client pays out for patent fees, patent renewal fees, reports, technical drawings etc so these are payments he makes which he then invoices on to his clients.
Historically in his Accounts he has netted the amounts he invoices to clients off the original cost he incurred, which of course reduces the net balance on that expense account.
Would it be better to treat the amounts invoiced to clients for these costs as sales (or other income) rather than netting the amounts invoiced off the costs he incurred or does it not really matter? The bottom line is the same.
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It doesn't matter which is "better", they are either dibursements and are neither income nor expenses, or they are recharges and are both income and expenses.
The key lies in to whom the supply is made. Who engages the suppliers of these ancillary services? If the providers see your client as their customer then the expenses are his and the money charged on to the end customer is your client's income. If the suppliers are engaged in the end client's name, they are the client's expenses and should not feature in the accounts.
The key thing here is whether or not the client is acting as agent or principal in the transaction. FRS 102 is clear on what is required in each circumstance.
If they're real disbursements, these transactions are neither income nor expense to the client's business. They are, in effect, loans to the client's client, repaid with the payment of his fee. They should match exactly.
Whilst they might appear on the invoice for the sake of convenience, they are not part of the client's fee income.
If I might take the example of billing £100 for filing a confirmation statement at Companies House, my invoice to the client would show £100 fee + £13 for the filing fee but I would only include £100 in my sales.