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HMRC internal manual

VAT Taxable Person Manual

HM Revenue & Customs
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Issues to consider: agency and disbursements: what is a disbursement?

A disbursement is where a payment is made by one party (agent) on behalf of another for goods or services received by that other party. In other words, the goods or services are not used by the agent, who does nothing more than make the payment and recharge to the client, passing on any invoices issued by the supplier as appropriate. This means that tax charged on the supply is recoverable as input tax only by the client receiving the supply and not by the agent but, conversely, the agent is not required to account for output tax on the amount recharged to the client.

The section 47 provisions explained in VTAXPER37500 will apply where agents act in their own name in arranging supplies of goods or where they are dealing with taxable supplies of services between VAT registered persons. However, if the section 47 arrangements are not applicable (ie the agent is not treated as receiving and making the supply), the disbursement procedure will be appropriate as in the following example.


An agent is asked to procure exempt financial services for his principal and has initially to pay for these services on the principal’s behalf. The agent therefore issues an itemised invoice to his principal, treating the cost of the financial services as a disbursement and declaring output tax only on the value of his own services in procuring the financial services, plus any associated expenses. In the course of paying this invoice, the principal will thus refund his agent the cost of the financial services.