DISBURSEMENTS
From 1 July 2023, new IPReg Rules applied, requiring, amongst other things, that we are more “transparent” about what we charge clients. This will probably have the greatest impact on patent renewals, where typically we previously put a mark-up of up to 40% on the actual disbursements.
We will have to start showing the amount of the actual disbursement and if we have any currency uplift, to insulate against exchange rate variations, we will have to explain this to the client. Clearly, explaining a 40% “uplift” is going to be difficult.
The proposed guidelines from IPReg say:
“We understand that firms we regulate try to deal practically with these uncertainties in several different ways. For example:
- such anticipated disbursements may be billed to the client in advance (based on current foreign exchange rates). Once paid by the client, these will then be paid promptly to the overseas agents. If, due to currency fluctuations, a subsequent shortfall or overpayment arises, the firm will reconcile the differences and bill or refund the difference or, with the client’s permission, apply it against future costs; or
- the firm pays the disbursement from their own business account and once the sterling cost is known it is billed this to the client in the normal way; or
- the firm may seek to manage exchange rate fluctuations by entering into a forward contract which delivers the required foreign currency at a chosen future date for a certain amount that can be then charged to the client.
Whatever approach you use, you must explain it to your client.”
It further says:
“In addition to these methods, we understand that some firms chose to use a modestly favourable exchange rate and then apply a percentage mark-up to cover the exchange rate risk, as well to cover the cost to the firm for handling, processing and paying for such disbursements. We understand that such percentages can vary widely but that a range of 10% – 12% is quite common and a mark-up of 20% or more are not unknown.
The approach that you use must be explained to your client and if the amount you charge your client for the payment includes an element of your profit cost, i.e. for processing the payment, this should be clearly described as such.
We suggest that in deciding your approach to dealing with exchange rate fluctuations, you should consider:
- how you would justify to your clients (or to us if we received a complaint) the appropriateness of the mark-up you have applied;
- how often you should analyse the risk from the exchange rate transactions that you are exposed to. It may be that for stable currencies the exchange rate risk is much less than it would be if you act for clients in locations with more volatile currencies;
- any tax or VAT implications. If you bill the client for a disbursement that includes an element of your profit, you may have to charge and account for VAT on the amount.”
We will therefore show the disbursements at cost and then show a “handling fee” as a set charge, which is currently 25% of the disbursement, subject to a minimum value of £20.
One aspect of this that we need to take into account is that when we enter into Equinox the invoices from foreign associates, we should do so in the currency of the invoice as Equinox is set up to handle foreign currencies. Don’t add a mark-up – Equinox offers the option of a percentage – but instead note the sterling equivalent and use this to calculate the percentage to add in to the 4571 charge.
Last Updated on 7 March 2025 by Keith