News & Articles

VAT

Is it a disbursement or part of the supply I am making?

by Jade Peters
20/11/2024

A common question we are asked is whether VAT should be added when passing on a cost to a customer. This question has been particularly common with landlords charging the cost of insurance to their tenants.

In these situations, the main consideration is  which party has the use of/the benefit of the additional service?

When we are considering building insurance, the policy will have most likely been taken out in the landlord’s name. If a claim was to be made against the insurance, the landlord would be the one to do this and would receive any due compensation. Therefore, the party that has the benefit of the insurance, would be the landlord. As a result, the cost of the insurance being passed onto the tenant would be an extension of the supply that the landlord is making.

A misconception is that, because insurance is an exempt supply, you wouldn’t add VAT to this added cost to the tenant. Because the landlord is not providing an insurance service to the customer, the added cost simply becomes part of the original supply made by the landlord. In the same way that any business owner would increase their prices to cover extra costs incurred. As a result, VAT should be added to the entire supply (providing the supply was taxable in the first place).

Disbursements are different in the sense that it is not the customer that had the use or enjoyment of the additional service (common examples being mileage, travel and subsistence costs).

If you have any questions about the above or would like more information specific to your circumstances, please get in touch .

Find out more
If you have any questions about the above, or would like more information specific to your circumstances, please enter your email address below and we will get in touch:

Related View All

The sale of Edocuments Ltd to Gilder Holdings Ltd
Corporate Finance
The sale of Edocuments Ltd to Gilder Holdings Ltd
The Sale of Qudini Ltd to Verint WS Holdings Ltd
Corporate Finance
The Sale of Qudini Ltd to Verint WS Holdings Ltd
 

Our Accreditations and Memberships