I know that if a VAT registered business makes purchases on behalf of customers and passes on these costs when invoicing, these can be treated as disbursements for VAT purposes and they don’t have to charge VAT on them. http://www.hmrc.gov.uk/vat/managing/charging/disbursements.htm
We are not VAT registered (below threshold) and purchase materials for clients and add these to our invoice at cost. If the cost of materials ever takes us over the VAT threshold, can we treat these as disbursements and thus remain under the VAT threshold? or is that not how it works?
For example (where the VAT threshold is £81,000), if we invoice £70,000 in labour and £50,000 in materials (invoiced to clients at cost) can we claim our turnover for VAT purposes is £70,000 (so we could remain unregistered) or would it be £120,000 (so we would have to register)?
Thanks
James