Courier charge – to add VAT or not

[Jane Moore]

Our partner is executor for an estate with deceased’s sister. The brother, who lives in Australia, has chosen certain antiques and the sister has brought them into the office to pack and send to Australia. The courier’s invoice does not include VAT. I cannot decide whether this is a recharge or disbursement. It is part of the process of distributing the chattels in the estate (not specifically bequeathed) but I’m not sure that the firm has added to or benefitted from the service. Veering towards a recharge but I know the client well and she will be very unhappy if we add VAT unnecessarily.

[Geoff Smith]

Firstly a question – has the courier already been paid for? If not perhaps the recipient can arrange and pay for the courier directly.
Second my answer – Darren is possibly the best person without question to give the definitive answer – but my own view is that the courier charge should be passed on “as is” without any additional VAT.
Darren will no doubt correct me if I’m wrong 🤔🤔🤔🙏🙏

[Jane Moore]

Yes, the courier has been paid. The brother and sister are virtually estranged so I think it was done this way for diplomatic reasons! I have to confess that I would probably have paid it out of client funds if we had any.

[Claire Mills]

We would treat it as a recharge as per paragraph 25.1.1 of HMRC VAT Notice 700.

your client actually received and used the goods or services provided by the third party (this condition usually prevents the agent’s own travelling and subsistence expenses, telephone bills, postage, and other costs being treated as disbursements for VAT purposes);

[Jane Moore]

Sorry Claire, isn’t that the wording to allow you to treat something as a disbursement for VAT and therefore in this case not add VAT?

[Claire Mills]

Hi

Yes that is the disb wording.

As the client hasn’t used the service it cannot be treated as a disbursement, as not all conditions are met.

That is how we would treat a courier fee. As it does not qualify as a disbursement, it would be a recharge/expense so VAT would be added on whether VAT was paid or not.

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