Disbursements vs recharges (expenses): key differences explained

If you buy things on behalf of your customers, you need to know the difference between a disbursement and a recharge.

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.

Read on to find out the difference between disbursements, recharges, and expenses, plus how to handle them on your invoices.

What is a disbursement payment?

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.

This means the goods or services you bought are for the customer’s benefit, not yours.

Here’s an example of a disbursement:

• 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 £20 and add £20 to the guest’s bill
• you acted as an agent. The guest used the service (the tax journey), not you
• this means the £20 cost is a disbursement

What is the difference between expenses (recharges) and disbursements?

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).

Even if you itemise these on an invoice, they don’t usually count as disbursements.

Here’s an example of when a payment isn’t a disbursement:

• you’re a consultant travelling to visit a client in London. You buy a train ticket for £50 to get there
• even though the travel is for the client’s project, you used the train service to do your job
• this is an expense (recharge). You must charge VAT on this cost when you bill the client (unless you’re not VAT-registered)

Disbursements and VAT – what you need to know

When it comes to disbursements, you don’t charge VAT on them. You simply pass on the exact cost. You also can’t claim back VAT on the original receipt.

In the case of expenses (recharges), you must charge VAT on these if you’re VAT-registered.

For example, a train ticket is zero-rated (0 per cent VAT). But if you buy a £50 ticket to visit a client and recharge it to them, you must add 20 per cent VAT to the £50 on your invoice. This is because the ‘supply’ is no longer ‘travel’. The supply is your service, which includes your travel costs.

What counts as a disbursement?

According to the government, for a payment to be considered a disbursement it must meet the following criteria:

• you acted as an agent for your customer, paying the supplier on their behalf
• your customer received the goods or services that you paid for on their behalf
• your customer was responsible for the goods or services you organised
• your customer was aware that the goods or services came from another supplier
• you had permission from your customer to buy the goods or services
• you list the costs as separate to your own services on an invoice
• you don’t charge your customer any extra for providing the goods or services

Types of disbursement

A disbursement can be a range of different payments, but it’ll always be something you’ve paid for on behalf of your customer and not something you’re charging for as a result of your work.

A disbursement could be helping your customer buy something at the same time you’re buying something for yourself. For example if you’re 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.

Other types of disbursements could be for products or services that you don’t offer but are able to organise on behalf of your customer.

It’s useful to think of yourself as an agent in this situation. You’re the middle person who facilitates things for your customer, alongside providing your own services.

However, it’s important to remember you’re 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.

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’re not sure of anything.

3 examples of disbursement and recharges

Here’s how different business types might encounter potential disbursements in 2026.

1. Marketing agencies

Disbursement: You pay for a client’s direct mail postage using their Royal Mail account details.

Recharge: You buy stock photos to use in a design you’re creating for the client. You’re using the photos to create your product, so this is a recharge.

2. Solicitors and conveyancers

Disbursement: Paying Stamp Duty Land Tax or a Land Registry fee on behalf of a homebuyer.

Recharge: Travel costs or phone calls made by the solicitor while working on the case.

3. Tradespeople

Disbursement: A customer asks you to pick up a specific boiler part that they ordered and reserved, and you simply pay for it upon collection.

Recharge: You buy wood, screws, and paint to build a wardrobe. You’re buying materials to deliver your service, so this is a recharge.

How to show disbursements and recharges on your invoices

When separating expenses and disbursements, it’s important your invoices are correct so that you’re paying the right amount of tax.

Here’s an example of how the costs should be separated and shown on an invoice:

You’re a graphic designer. You charge £1,000 for a client project, but you also paid £100 for a website domain name that’s registered in the client’s name (disbursement) and you spent £50 on train travel to visit them (recharge).

Your invoice should look like this:

Read our guide on how to write an invoice and download our free invoice template for more information.

More finance guides for small businesses

• The best joint business account for small businesses
• What limited company expenses can I claim?
• What is zero-based budgeting – and can it save your business money?
• Cash basis vs accrual accounting – what’s the difference?