# Law firm disbursements on e-invoices: 2029 guide

> How law firms and other professional services firms should handle disbursements, recharges and confidential detail when invoices become e-invoices.

- Canonical URL: https://einvoices.uk/news/e-invoicing-professional-services-law-firms
- Published: 20 October 2026 (2026-10-20)
- Last updated: 20 October 2026 (2026-10-20) (not updated since publication)
- Author: Floris Lindenaar, Editor, e-invoicing expert (https://einvoices.uk/authors/floris-lindenaar)
- Publisher: einvoices.uk (https://einvoices.uk)
- Type: Guide
- Topics: Sectors, VAT, 2029 mandate, Technical
- Language: en-GB (UK English); covers the United Kingdom

## Sources

- [VAT: costs or disbursements passed to customers](https://www.gov.uk/guidance/vat-costs-or-disbursements-passed-to-customers)
- [VAT guide (VAT Notice 700)](https://www.gov.uk/guidance/vat-guide-notice-700)
- [Promoting electronic invoicing across UK businesses and the public sector: consultation response](https://www.gov.uk/government/consultations/promoting-electronic-invoicing-across-uk-businesses-and-the-public-sector/outcome/promoting-electronic-invoicing-across-uk-businesses-and-the-public-sector-consultation-response)
- [Tax update 2026: simplification, modernisation and fairness summary](https://www.gov.uk/government/publications/summary-of-tax-update-2026-simplification-modernisation-and-fairness/tax-update-2026-simplification-modernisation-and-fairness-summary)

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Disbursements are the professional-services question for the 2029 mandate. HMRC lets you leave a **genuine disbursement** out of the VAT calculation, as long as it is **itemised separately** on the invoice. Turning that into a structured e-invoice is not straightforward. The European standard behind Peppol does not let you mix "not subject to VAT" lines with standard-rated fees on one invoice, and the UK has **not yet confirmed** how disbursements should be coded. Here is what the rules say today, where the friction lies, and what to do before 2029.

## Who is in scope

From **April 2029**, VAT invoices issued between VAT-registered businesses (B2B) and to public bodies (B2G) must be e-invoices. For a law firm, accountancy practice, consultancy or agency, that means:

- **Corporate and commercial clients** that are VAT-registered: likely in scope
- **Public-sector clients** (councils, NHS, departments): in scope
- **Private clients** such as conveyancing, wills, family and personal injury work: B2C, and not expected to be covered

Many firms bill both, so plan for two invoice routes.

## What counts as a disbursement for VAT

HMRC's guide [VAT: costs or disbursements passed to customers](https://www.gov.uk/guidance/vat-costs-or-disbursements-passed-to-customers) and [VAT Notice 700](https://www.gov.uk/guidance/vat-guide-notice-700) (section 25) set eight conditions, **all** of which must be met:

1. You acted as your client's **agent** when you paid the third party.
2. The client **received, used or had the benefit of** the goods or services.
3. It was the **client's responsibility** to pay.
4. The client **authorised** you to pay.
5. The client **knew** the goods or services came from a third party.
6. The cost is **shown separately** on your invoice.
7. You pass on the **exact amount** paid.
8. The goods or services are **clearly additional** to your own supply.

HMRC's examples of costs that are **not** disbursements:

| Cost | Disbursement? | Why |
|---|---|---|
| Bank fee for a telegraphic transfer to or from your own client account | No | Supplied to the firm, not the client |
| Personal search of official records to advise the client | No | The firm receives the information to give advice |
| Postal search obtaining a document for the client | Can be | The firm just obtains a document on the client's behalf |
| Your air fare or travel to see the client | No | Supplied to you; a recharge, so VAT applies |
| Your own postage and phone | No | Normal business costs |

HMRC also notes that treating a payment as a disbursement is usually only worth it where the third party charged no VAT, or the client cannot reclaim VAT.

### HMRC's worked example

Notice 700 shows how the invoice should look. It covers services of £80, non-disbursement expenses of £20 and a qualifying disbursement of £50:

| Line | £ |
|---|---|
| Services | 80.00 |
| Expenses (recharge) | 20.00 |
| **Value for VAT** | **100.00** |
| VAT at 20% | 20.00 |
| Disbursements | 50.00 |
| **Total** | **170.00** |

## Where e-invoicing gets awkward

In a paper or PDF invoice, the disbursement simply sits below the VAT line. In an EN 16931 invoice, which Peppol BIS Billing 3.0 is based on, **every line must carry a VAT category code**, and the totals must add up exactly. The options all have problems:

- **"Not subject to VAT" (category O)** fits the idea best, but rule **BR-O-11** says an invoice with an "O" VAT breakdown "shall not contain other VAT breakdown groups". You cannot combine it with standard-rated fees on one invoice.
- **Exempt (E)** or **zero-rated (Z)** would misdescribe the disbursement. It is not your exempt or zero-rated supply at all, and it would sit in your VAT return as one.
- **A separate invoice for disbursements** solves the coding but changes billing practice, and you need to think about how that document is treated.
- **Leaving disbursements off the invoice** and requesting them separately breaks HMRC's condition that they are itemised on your invoice.

**None of these is confirmed as the UK approach.** The government's [consultation response](https://www.gov.uk/government/consultations/promoting-electronic-invoicing-across-uk-businesses-and-the-public-sector/outcome/promoting-electronic-invoicing-across-uk-businesses-and-the-public-sector-consultation-response) says its technical work will include "designing potential extensions to the standardised invoice to accommodate sector specific needs". Disbursements are an obvious candidate. See [UK VAT category codes in Peppol](https://einvoices.uk/news/uk-vat-category-codes-peppol).

## Confidential billing detail

Narrative-heavy bills are another issue. An e-invoice is structured data that flows into the client's finance system, so line descriptions may be read by more people than a partner's covering letter would be. The consultation response noted respondents' concerns about how data will be stored, shared and used, "particularly in sensitive sectors like legal services and healthcare".

Practical steps:

- Keep the **VAT invoice description** sufficient to identify the services, as Notice 700 requires, without privileged detail.
- Put detailed narrative in a separate **attachment** or matter report where the client accepts that. See [invoice attachments in Peppol](https://einvoices.uk/news/invoice-attachments-peppol).
- Agree a client **buyer reference** or matter number so invoices route to the right approver. See [buyer reference](https://einvoices.uk/news/purchase-order-reference-buyer-reference-peppol).

Many large corporate clients already ask law firms to submit bills through e-billing or legal-spend platforms. Those platforms are not necessarily connected to Peppol, which the government has [announced](https://www.gov.uk/government/publications/summary-of-tax-update-2026-simplification-modernisation-and-fairness/tax-update-2026-simplification-modernisation-and-fairness-summary) as the core network for UK e-invoicing. How such platforms will sit alongside the mandate is **not yet confirmed**. HMRC's current guidance also warns against running dual paper and electronic invoice systems for the same supplies, outside a controlled trial.

## Other professional-services points

- **Interim and final bills.** Each VAT invoice creates a tax point when issued in advance of completion. Make sure interim bills that are VAT invoices go out as e-invoices, and that requests for payment on account are clearly not VAT invoices.
- **Credit notes and write-offs.** Fee reductions after billing need structured credit notes referencing the original invoice. See [credit notes in Peppol](https://einvoices.uk/news/credit-notes-peppol-uk).
- **Third-party payers.** Where an insurer or another party pays the bill but the client receives the service, check who the VAT invoice must be addressed to before setting up Peppol routing.
- **Foreign clients.** Services to overseas business clients are often outside the scope of UK VAT. The mandate is about domestic VAT invoices. See [invoicing EU customers](https://einvoices.uk/news/uk-businesses-selling-to-eu-e-invoicing).

## What to do now

1. **Audit your disbursement codes** against HMRC's eight conditions. Many firms find recharges filed as disbursements, and errors like that will surface quickly in structured data.
2. **Separate B2B and B2C billing** in your practice-management system.
3. **Ask your practice-management provider** how it will handle disbursements under BR-O-11, and how it plans to connect to Peppol.
4. **Review standard bill narratives** for confidentiality.

Accountants advising clients should also read the [guide for accountants](https://einvoices.uk/news/e-invoicing-guide-for-accountants). This is general information, not tax advice. Follow HMRC's guidance for specific cases.

## Frequently asked questions

### How do you show disbursements on an e-invoice?

Under HMRC rules, a true VAT disbursement must be itemised separately and left out of the VAT calculation. How it should be coded in a structured UK e-invoice has not been confirmed. The EN 16931 standard does not let 'not subject to VAT' lines sit on the same invoice as standard-rated lines.

### Are court fees and search fees disbursements for VAT?

Some are and some are not. HMRC says a postal search obtained for the client may be a disbursement, but a personal search a solicitor does to advise the client is not. Its VAT is due as part of the solicitor's own fee.

### Do law firms need e-invoicing for private clients?

The mandate covers VAT invoices between VAT-registered businesses and to the public sector. Bills to private individuals are B2C and are not expected to be covered, although detailed scope rules have not been published.

### Can I recharge travel without VAT as a disbursement?

No. HMRC says your own travel, postage and similar costs are part of your supply. If you pass them on, they are recharges and VAT is due on them.

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How to cite: "Law firm disbursements on e-invoices: 2029 guide", einvoices.uk, 20 October 2026, https://einvoices.uk/news/e-invoicing-professional-services-law-firms

einvoices.uk is an independent publication and is not affiliated with HMRC or the UK Government. Nothing here is tax advice; check the sources and official GOV.UK guidance before acting.