Disbursements and Recharged Expenditure

There are occasions when it is necessary or expedient for the academy trust to incur expenditure on behalf of a third party.

Where the expenditure is a genuine disbursement it is not considered to be a supply made by the trust to the customer.

Examples are quite rate, but could include charges incurred by a hirer of facilities for their utility bills where these were the tenant’s responsibility.  This would be more likely to arise in connection with a longer lease, such as a building leased to an unconnected nursery than, say, a short sports letting.

However, HMRC make clear that they will only accept disbursement treatment of an amount being rechared where specific conditions are met.

For an amount to be treated as a disbursement all of the following conditions to be met:

• the trust acted as the agent of your customer when you paid the third party
• your customer actually received and used the goods or services provided by the third party
• your customer was responsible for paying the third party
• your customer authorised the academy trust to make the payment on their behalf
• your customer knew that the goods or services would be provided by a third party
• the trust’s outlay will be separately itemised when invoicing the customer
• only the exact amount paid to the third party is reclaimed
• the goods or services are clearly additional to the supplies made by the academy trust to the customer

If any of these conditions are not satisified the charge will be subject to VAT in the usual way, with the rate of VAT determined by the type of supply made.

VAT Treatment