{"id":1565,"date":"2026-02-23T16:49:39","date_gmt":"2026-02-23T16:49:39","guid":{"rendered":"https:\/\/www.simplybusiness.co.uk\/knowledge\/cash-flow\/what-is-a-disbursement\/"},"modified":"2026-02-23T16:49:40","modified_gmt":"2026-02-23T16:49:40","slug":"what-is-a-disbursement","status":"publish","type":"knowledge","link":"https:\/\/www.simplybusiness.co.uk\/knowledge\/cash-flow\/what-is-a-disbursement\/","title":{"rendered":"Disbursements vs recharges (expenses): key differences explained"},"content":{"rendered":"\n<p class=\"wp-block-paragraph\">If you buy things on behalf of your customers, you need to know the difference between a disbursement and a recharge.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Getting this wrong can mean you end up paying the wrong amount of VAT. And since HMRC is strict on these rules, it pays to get it right.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Read on to find out the difference between disbursements, recharges, and expenses, plus how to handle them on your invoices.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-what-is-a-disbursement-payment\">What is a disbursement payment?<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">A disbursement is a payment that you make on behalf of a customer that you charge back to them. Crucially, you act as an agent for your customer when you make the payment.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">This means the goods or services you bought are for the customer\u2019s benefit, not yours.<\/p>\n\n\n\n<div class=\"wp-block-group has-azure-300-background-color has-background has-global-padding is-layout-constrained wp-container-core-group-is-layout-69910985 wp-block-group-is-layout-constrained\" style=\"border-radius:10px;padding-top:var(--wp--preset--spacing--20);padding-right:var(--wp--preset--spacing--90);padding-bottom:var(--wp--preset--spacing--50);padding-left:var(--wp--preset--spacing--90)\">\n<h3 class=\"wp-block-heading\" id=\"h-disbursements-the-golden-rule\">Disbursements \u2013 the golden rule<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">For a payment to be a disbursement, you must simply be the \u2018middle person\u2019 paying a bill that belongs to your customer.<\/p>\n<\/div>\n\n\n\n<p class=\"wp-block-paragraph\">Here\u2019s an example of a disbursement:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li class=\"wp-block-list-item\">you run a bed and breakfast. A guest asks you to book a taxi to take them to the station. You pay the taxi driver \u00a320 and add \u00a320 to the guest&#8217;s bill<\/li>\n\n\n\n<li class=\"wp-block-list-item\">you acted as an agent. The guest used the service (the tax journey), not you<\/li>\n\n\n\n<li class=\"wp-block-list-item\">this means the \u00a320 cost is a disbursement<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-what-is-the-difference-between-expenses-recharges-and-disbursements\"><strong>What is the difference between expenses (recharges) and disbursements?<\/strong><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">This is where many business owners get confused. There are costs you pay to run your business and deliver your service. These are expenses (also called recharges when you pass the cost to the client).<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Even if you itemise these on an invoice, they don\u2019t usually count as disbursements.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Here\u2019s an example of when a payment isn\u2019t a disbursement:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li class=\"wp-block-list-item\">you\u2019re a consultant travelling to visit a client in London. You buy a train ticket for \u00a350 to get there<\/li>\n\n\n\n<li class=\"wp-block-list-item\">even though the travel is for the client&#8217;s project, you used the train service to do your job<\/li>\n\n\n\n<li class=\"wp-block-list-item\">this is an expense (recharge). You must charge VAT on this cost when you bill the client (unless you\u2019re not VAT-registered)<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-disbursements-and-vat-what-you-need-to-know\">Disbursements and VAT \u2013 what you need to know<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">When it comes to disbursements, you don\u2019t charge VAT on them. You simply pass on the exact cost. You also can\u2019t claim back VAT on the original receipt.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">In the case of expenses (recharges), you must charge VAT on these if you\u2019re VAT-registered.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">For example, a train ticket is zero-rated (0 per cent VAT). But if you buy a \u00a350 ticket to visit a client and recharge it to them, you must add 20 per cent VAT to the \u00a350 on your invoice. This is because the \u2018supply\u2019 is no longer \u2018travel\u2019. The supply is your service, which includes your travel costs.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-what-counts-as-a-disbursement\">What counts as a disbursement?<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">According to <a href=\"https:\/\/www.gov.uk\/guidance\/vat-costs-or-disbursements-passed-to-customers\" target=\"_blank\" rel=\"noreferrer noopener\" rel=\"noopener noreferrer\" target=\"_blank\">the government<\/a>, for a payment to be considered a disbursement it must meet the following criteria:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li class=\"wp-block-list-item\">you acted as an agent for your customer, paying the supplier on their behalf<\/li>\n\n\n\n<li class=\"wp-block-list-item\">your customer received the goods or services that you paid for on their behalf<\/li>\n\n\n\n<li class=\"wp-block-list-item\">your customer was responsible for the goods or services you organised<\/li>\n\n\n\n<li class=\"wp-block-list-item\">your customer was aware that the goods or services came from another supplier<\/li>\n\n\n\n<li class=\"wp-block-list-item\">you had permission from your customer to buy the goods or services<\/li>\n\n\n\n<li class=\"wp-block-list-item\">you list the costs as separate to your own services on an invoice <\/li>\n\n\n\n<li class=\"wp-block-list-item\">you don\u2019t charge your customer any extra for providing the goods or services<\/li>\n<\/ul>\n\n\n\n<div class=\"wp-block-group has-azure-200-background-color has-background has-global-padding is-layout-constrained wp-container-core-group-is-layout-30c80bf8 wp-block-group-is-layout-constrained\" style=\"border-radius:10px;margin-top:var(--wp--preset--spacing--90);margin-bottom:var(--wp--preset--spacing--90);padding-top:var(--wp--preset--spacing--90);padding-right:var(--wp--preset--spacing--90);padding-bottom:var(--wp--preset--spacing--90);padding-left:var(--wp--preset--spacing--90)\">\n<h3 class=\"wp-block-heading\" id=\"h-what-isn-t-a-disbursement\">What isn\u2019t a disbursement?<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Sometimes a business might decide to charge customers for its expenses. For example, when working for a customer you may run up costs for things like:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li class=\"wp-block-list-item\">printing<\/li>\n\n\n\n<li class=\"wp-block-list-item\">postage<\/li>\n\n\n\n<li class=\"wp-block-list-item\">travel<\/li>\n\n\n\n<li class=\"wp-block-list-item\">food and drink<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">When you do this, you\u2019ll need to charge the customer VAT on top of the expense (whether you paid it or not). You can\u2019t recharge the expense as a disbursement because the cost was incurred by your business and not your customer.<\/p>\n<\/div>\n\n\n\n<div id=\"nba-body-001\">\n<\/div>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-types-of-disbursement\">Types of disbursement<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">A disbursement can be a range of different payments, but it\u2019ll always be something you\u2019ve paid for on behalf of your customer and not something you\u2019re charging for as a result of your work.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">A disbursement could be helping your customer buy something at the same time you\u2019re buying something for yourself. For example if you\u2019re travelling somewhere with your customer, you could buy their ticket at the same time as yours. The ticket you buy for yourself would be an expense, while the ticket you buy for them would be a disbursement.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Other types of disbursements could be for products or services that you don\u2019t offer but are able to organise on behalf of your customer.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">It\u2019s useful to think of yourself as an agent in this situation. You\u2019re the middle person who facilitates things for your customer, alongside providing your own services.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">However, it\u2019s important to remember you\u2019re not acting like a professional agent such as an estate agent or recruitment agent. This is because disbursements must be recharged directly to your customer with no commission fee.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><em>This article is intended as a guide only. Deciding on what is a disbursement and what is an expense can be tricky, so make sure you get help from a professional accountant or finance expert if you\u2019re not sure of anything.<\/em><\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-3-examples-of-disbursement-and-recharges\">3 examples of disbursement and recharges<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Here\u2019s how different business types might encounter potential disbursements in 2026.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-1-marketing-agencies\"><strong>1. Marketing agencies<\/strong><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Disbursement:<\/strong> You pay for a client\u2019s direct mail postage using their Royal Mail account details.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Recharge:<\/strong> You buy stock photos to use in a design you\u2019re creating for the client. You\u2019re using the photos to create your product, so this is a recharge.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-2-solicitors-and-conveyancers\">2. Solicitors and conveyancers<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Disbursement:<\/strong> Paying Stamp Duty Land Tax or a Land Registry fee on behalf of a homebuyer.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Recharge:<\/strong> Travel costs or phone calls made by the solicitor while working on the case.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-3-tradespeople\">3. Tradespeople<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Disbursement:<\/strong> A customer asks you to pick up a specific boiler part that they ordered and reserved, and you simply pay for it upon collection.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Recharge:<\/strong> You buy wood, screws, and paint to build a wardrobe. You\u2019re buying materials to deliver your service, so this is a recharge.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-how-to-show-disbursements-and-recharges-on-your-invoices\">How to show disbursements and recharges on your invoices<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">When separating expenses and disbursements, it\u2019s important your invoices are correct so that you\u2019re paying the right amount of tax.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Here\u2019s an example of how the costs should be separated and shown on an invoice:<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">You\u2019re a graphic designer. You charge \u00a31,000 for a client project, but you also paid \u00a3100 for a website domain name that\u2019s registered in the client&#8217;s name (disbursement) and you spent \u00a350 on train travel to visit them (recharge).<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Your invoice should look like this:<\/p>\n\n\n\n<figure class=\"wp-block-table\"><table class=\"has-fixed-layout\"><tbody><tr><td><strong>Item<\/strong><\/td><td><strong>Net amount<\/strong><\/td><td><strong>VAT (20%)<\/strong><\/td><td><strong>Total<\/strong><\/td><\/tr><tr><td>Design services<\/td><td>\u00a31,000<\/td><td>\u00a3200<\/td><td>\u00a31,200<\/td><\/tr><tr><td>Travel Expenses (Recharge)<\/td><td>\u00a350<\/td><td>\u00a310<\/td><td>\u00a360<\/td><\/tr><tr><td>Domain name (Disbursement)<\/td><td>\u00a3100<\/td><td>\u00a30<\/td><td>\u00a3100<\/td><\/tr><tr><td colspan=\"3\"><strong>Total to pay<\/strong><\/td><td>\u00a31,360<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<p class=\"wp-block-paragraph\">Read our guide on how to write an invoice and <a href=\"\/knowledge\/cash-flow\/how-to-write-an-invoice\/\" data-type=\"knowledge\" data-id=\"1461\">download our free invoice template<\/a> for more information.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-more-finance-guides-for-small-businesses\">More finance guides for small businesses<\/h3>\n\n\n\n<ul class=\"wp-block-list\">\n<li class=\"wp-block-list-item\"><a href=\"\/knowledge\/banking\/joint-business-account-for-small-businesses\/\" data-type=\"knowledge\" data-id=\"1466\">The best joint business account for small businesses<\/a><\/li>\n\n\n\n<li class=\"wp-block-list-item\"><a href=\"\/knowledge\/business-tax\/limited-company-expenses\/\" data-type=\"knowledge\" data-id=\"1478\">What limited company expenses can I claim?<\/a><\/li>\n\n\n\n<li class=\"wp-block-list-item\"><a href=\"\/knowledge\/income\/what-is-zero-based-budgeting\/\" data-type=\"knowledge\" data-id=\"1589\">What is zero-based budgeting \u2013 and can it save your business money?<\/a><\/li>\n\n\n\n<li class=\"wp-block-list-item\"><a href=\"\/knowledge\/business-tax\/cash-basis-vs-accrual-accounting\/\" data-type=\"knowledge\" data-id=\"1362\">Cash basis vs accrual accounting \u2013 what\u2019s the difference?<\/a><\/li>\n<\/ul>\n\n\n\n<div id=\"nba-upsell-001\" class=\"wp-block-group has-azure-200-background-color has-background has-global-padding is-layout-constrained wp-container-core-group-is-layout-94e519ba wp-block-group-is-layout-constrained\" style=\"padding-top:var(--wp--preset--spacing--80);padding-right:var(--wp--preset--spacing--40);padding-bottom:var(--wp--preset--spacing--80);padding-left:var(--wp--preset--spacing--40)\">\n<h3 class=\"wp-block-heading has-text-align-center\" id=\"h-ready-to-set-up-your-cover\">Ready to set up your cover?<\/h3>\n\n\n\n<p class=\"has-text-align-center wp-block-paragraph\">As one of the UK&#8217;s biggest <a href=\"\/business-insurance\/\" data-type=\"page\" data-id=\"5152\">business insurance<\/a> providers, we specialise in <a href=\"\/business-insurance\/public-liability-insurance\/\">public liability insurance<\/a> and protect more trades than anybody else. Why not take a look now and build a quick, tailored quote?<\/p>\n\n\n\n<div class=\"wp-block-buttons is-content-justification-center is-layout-flex wp-container-core-buttons-is-layout-a89b3969 wp-block-buttons-is-layout-flex\">\n<div class=\"wp-block-button\"><a class=\"wp-block-button__link wp-element-button\" href=\"https:\/\/quote.simplybusiness.co.uk\/business\">Start your quote<\/a><\/div>\n<\/div>\n<\/div>\n\n\n\n<div id=\"nba-body-end\">\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>What\u2019s the difference between expenses and disbursements?<\/p>\n","protected":false},"author":3,"featured_media":4180,"comment_status":"open","ping_status":"closed","template":"","meta":{"sb_hreflang":"","sb_hreflang_url":"","disable_breadcrumbs":false,"sb_breadcrumbs":[],"sb_reviewed_by":"","sb_review_date":"","sb_enable_content_gating":true,"footnotes":""},"categories":[350,336],"hidden-category":[],"coauthors":[20],"class_list":["post-1565","knowledge","type-knowledge","status-publish","has-post-thumbnail","hentry","category-cash-flow","category-business-structure"],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v27.2 (Yoast SEO v27.2) - https:\/\/yoast.com\/product\/yoast-seo-premium-wordpress\/ -->\n<title>Disbursements vs recharges \u2013 key differences explained<\/title>\n<meta name=\"description\" content=\"What\u2019s the difference between disbursements and recharges (expenses), and how do you know when to pay VAT? 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