# legal.disbursements-vat
Solicitors, accountants and other professionals pass costs on to clients all
the time, and the VAT question is always the same: is it a **disbursement for
VAT purposes** (paid as the client's agent, left out of the value of your
supply, no VAT added by you) or a **recharge** (a cost of your own supply,
included in its value, so VAT is charged on it at the rate of your main supply,
usually the standard rate, even if the original cost had no VAT)?
HMRC's answer is a checklist: a payment to a third party may be treated as a
disbursement only if **all** of these are met (VAT Notice 700, section 25.1.1):
1. `actedAsAgent`: you acted as the agent of your client when you paid the third party;
2. `clientReceivedAndUsed`: your client actually received and used the goods or services provided by the third party (this usually rules out your own travel and subsistence, phone bills and postage);
3. `clientResponsibleToPay`: your client was responsible for paying the third party (for example Stamp Duty on the client's contract);
4. `clientAuthorisedPayment`: your client authorised you to make the payment on their behalf;
5. `clientKnewThirdParty`: your client knew that the goods or services would be provided by a third party;
6. `separatelyItemised`: your outlay is separately itemised when you invoice your client;
7. `exactAmountRecovered`: you recover only the exact amount you paid to the third party;
8. `additionalToOwnSupply`: the goods or services are clearly additional to the supplies you make to your client on your own account.
This capability applies that checklist and nothing more. It returns the
treatment, the names of any conditions that failed (in the order above) and a
one-sentence reason. Deciding each fact is the professional judgement: HMRC's
own examples in section 25.1.3 include a bank's telegraphic transfer fee, which
is supplied to the solicitor, not the client, and so is a recharge even at cost.
On the invoice, a recharge goes into "value for VAT" with your fees, and a
disbursement goes below the VAT line (Notice 700 section 25.1.2 has the worked
example: services 80.00 + expenses 20.00 = value for VAT 100.00, VAT 20.00,
disbursements 50.00, total 170.00). If you treat a standard-rated cost as a
disbursement you cannot reclaim its input tax, because the supply was made to
your client, not to you. Compute the VAT itself with finance.tax.add-vat.
Source: HMRC, "VAT guide (VAT Notice 700)", section 25 "Supplies made by or
through agents: other situations", 25.1 "Disbursements for VAT purposes",
https://www.gov.uk/guidance/vat-guide-notice-700, read 23 September 2026. See
also "VAT: costs or disbursements passed to customers",
https://www.gov.uk/guidance/vat-costs-or-disbursements-passed-to-customers.
UK VAT only.
## Before you rely on this
**Not professional advice.** This capability calculates legal figures from published rules. It is a software component for developers, not legal advice. Rules change and every rate here has an effective date. Check that the dates cover your case. Verify results against the official sources listed above, and have a solicitor review how you use it, before anyone relies on the output. Provided "as is" under its licence, without warranty.
**Unreviewed.** This capability's implementations agree in every language and pass its published test vectors, which were worked out from the official sources cited. But no qualified solicitor has yet checked those vectors, or confirmed that the capability covers the cases it claims. Treat it as a draft. Do not use it for real people, money or decisions without your own expert review. Once a qualified reviewer signs off, this notice is replaced with their name, qualification and the date. Each new version needs fresh sign-off.
1.0.1 marks it unreviewed. The code and the tests are unchanged.