---
title: "VAT for Interior Designers: What to do when you buy furniture for clients"
description: Guide for interior designers on how VAT works when buying and recharging furniture for clients, covering thresholds, supplier VAT status, and mark-ups.
image: https://esxr.co.uk/hubfs/250826%20Interior%20design.webp
---

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# VAT for Interior Designers: What to do when you buy furniture for clients

![Interior designer sat with a client](https://esxr.co.uk/hubfs/250826%20Interior%20design.webp)

- August 26, 2025

![Dean Shepherd CTA FMAAT, Chartered Tax Adviser, ~30 years experience](https://esxr.co.uk/hubfs/Dean03.webp)

[Dean Shepherd CTA FMAAT, Chartered Tax Adviser, ~30 years experience](https://esxr.co.uk/blog/author/dean-shepherd)

If you’re an interior design studio that sources furniture and furnishings for clients, VAT can get messy fast. The key question in almost every scenario is: **are you acting as principal (buying and reselling the goods)** or **as agent (arranging the purchase on the client’s behalf)**? That single decision drives whether you charge VAT, how much counts towards the VAT registration threshold, and what shows up as your income.

Below are the three common scenarios — explained in plain English — with simple, workable ways to set things up correctly.

 

 

### 1) You’re **not VAT registered** yet. Do furniture recharges count towards the £90k threshold — and can you avoid it?

**Short answer:** Yes, if you buy goods and **resell** them to your client (you’re the principal), the **full selling price** of those goods counts towards your **taxable turnover** for the VAT registration threshold (currently **£90,000** in any rolling 12 months).

**How to avoid tipping over the threshold unnecessarily:** Use a proper **agency/disbursement** set-up so that **the client is the one buying the goods** and you’re just arranging the purchase. If you meet **all** the HMRC disbursement conditions (e.g. client receives/uses the goods, it’s the client’s legal obligation to pay, you pass on the **exact** amount with **no markup**, and you **itemise** the disbursement separately) then that pass-through amount is **outside the scope of your VAT** and does **not** form part of your taxable turnover.

##### **What to put in place (practical steps):**

- Contract and/or PO states you’re **acting as agent** to procure specified items.

- Supplier invoice is addressed to the **client** (or clearly shows the client as customer).

- You **don’t add any margin** to the goods’ price.

- Your invoice to the client shows two separate lines: 
    - **Your design/arrangement fee** (this is your income; VAT only applies once you’re registered).
    - **Disbursement: En Allant Aux Baux Cypres cushion, Christian Lacroix Maison - £165** (exact cost, no VAT added by you).

If you **add a margin** or if the paperwork shows **you** as buyer, HMRC will treat it as **your supply** (a resale), meaning the **full amount** counts to the threshold.

 

### 2) You **are VAT registered**, but the furnishings supplier is **not**. Do you have to add VAT when recharging the client — and can that be avoided?

**If you’re the principal (reselling):** Yes. You must charge VAT on the **full amount you bill the client**, even if the supplier didn’t charge you VAT. That’s because **your** supply to the client is a **taxable supply**, and you account for VAT on **your selling price**, not on what VAT you did or didn’t suffer.

**How to avoid charging VAT on the goods value:** Again, operate as **agent** using HMRC’s **disbursement** rules. If the client contracts with — and is invoiced by — the **unregistered supplier** for the goods, then you only charge VAT (at 20%) on **your fee** for arranging/design. The goods cost is passed through at exact cost as a **disbursement** and is kept **outside your VAT** (assuming all eight conditions are met and you itemise correctly).

**Warning:** If you **issue your own invoice for the goods** or otherwise **act in your own name**, VAT law treats the goods as **supplied to you and by you**, pulling you into the supply chain — and you must charge VAT on the **full onward charge**.

 

### 3) You charge a **mark-up** or a **finder’s fee**. Do you declare only the mark-up as income, or the full cost?

There are **two models** — pick one and keep the paperwork consistent:

##### A) **Principal (Resale) Model**

- You buy the furniture and **resell** it to the client (you set the selling price, carry the credit/warranty risk, handle returns).

- **VAT:** You charge VAT on the **full selling price** (goods + any margin).

- **Income (accounts):** You recognise **gross sales** for the full amount and record your **cost of sales** separately.

- **Use this if:** You want to apply a **margin** to products and manage the full client experience end-to-end.

##### B) **Agency / Disbursement Model**

- The **client** is the buyer; supplier invoices are in the client’s name; you just arrange and pay **on their behalf**.

- You pass on goods **at exact cost** as a **disbursement** (no margin), shown on a **separate line**; and you separately invoice your **finder’s fee/arrangement fee** (this fee is your income).

- **VAT:** You **do not** charge VAT on the disbursement (it’s outside your VAT), but you **do** charge VAT on **your fee** (if registered). You **cannot** claim input VAT on disbursements either.

- **Income (accounts):** You recognise **only your fee** as revenue; the disbursement bypasses income (it’s a pass-through).

- **Use this if:** The client would benefit from **avoiding VAT** on goods supplied by a **non-VAT-registered** supplier, and you’re happy charging a **transparent fee** instead of a margin.

> **Important:** Adding a **mark-up** to a “disbursement” **breaks** the disbursement conditions. If you want a margin on goods, you are almost certainly acting as **principal**, and VAT applies to the **full charge**.

### Quick checklist: getting the **agency/disbursement** route right

To treat the goods cost as a **disbursement** you must meet **all eight** HMRC conditions, including: act as **agent**, client is the **user/beneficiary** and **responsible to pay**, client **knows** the third-party supplier, you show the cost **separately**, you pass on the **exact amount**, and the goods are **in addition** to your own services. Keep evidence (orders, permissions, invoices) and **don’t claim input VAT** on those items.

 

 

### Practical tips for interior design studios

- Decide **per project** whether you’re principal or agent — and reflect that in **contracts**, **POs**, and **invoices**.

- If you’re close to the **£90k threshold**, remember it’s based on **total taxable turnover** (everything you sell that isn’t exempt). Poorly structured recharges can push you over.

- Where a supplier is **not VAT registered**, an **agency/disbursement** approach can save your client VAT on the goods (they’ll still pay VAT on your fee if you’re registered).

### Final word

Getting the paperwork and wording right **up-front** prevents painful VAT surprises later. 

---

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