VAT on expenses

OnlyMe_08

Hi

Not sure where to post this, but can a business claim VAT in respect of theri employees expenses, such as food, entertaining, hotels etc?

00ec25

yes but only where the employee has submitted a valid VAT receipt to support their expense claim. No VAT receipt - no VAT reclaim.

The small VAT receipt rules apply in this context to define what is meant by a valid VAT receipt, ie must have VAT number and rate quoted but does not always have physically show the itemised VAT value of the transaction. This often affects food claims eg: subsistence claims for luch etc. Remember not all food is standard rated anyway so you cannot just blanket recover VAT.

JasonLVC

AS 00ec has already posted, the business can reclaim the input tax on expneses provided the employee submits a proper expenses claim form (ie, making the purchases made by th employee, officially business purchases).

The receipts must show VAT and a description of the purchase (ie, food, drink, etc) as well as details of who has made the supply (ie, Tesco).

You cannot reclaim input tax on business entertaining so if your sales guy has gone out for a curry with a client, you can only reclaim the input tax relating to the salesmans food, not the client's.

You can claim fr hotels as well, same rules apply - you can only reclaim costs relating to employees, not clients/supplers/mates.

You can reclaim for food/drinks purchased by staff if you allow them to buy lunch on their expenses if they are on the road all day, etc - but still need a receipt.

One other thing to look out for is if all these food/hotel expneses are incurred by a Director/owner of the company - HMRC have these guidelines that say Directors/Owners can also claim for food but the purchases cannot be made 'near the place of work' - bascally to stop the boss going to the bistro on the corner everyday for lunch and sticking it through the books so to speak.

slipp_digby

I think that I am correct in saying that the VAT element of fuel can be reclaimed by the company, providing that the employee gets a VAT receipt for the fuel.

So if you are paying the employee 40p/mile you can claim back the input VAT on the proportion of the 40p/mile which is the fuel cost. Quite a small amount, but worthwhile where there are large mileage or multiple employees. Quite easy to add a calculation to the expenses sheet.

OnlyMe_08

Thanks for the replies.

So bottom line is in order to claim VAT, there must be a valid VAT receipt showing VAT number and rate in force, but not always necessary for the VAT element to be shown? I ask this, because for example if some materials for a job was purchased from say B&Q, and you know it is a taxable supply, their reciepts will show VAT number, but not the VAT rate or component - could VAT be reclaimed in this instance?

How about staff entertaining, or food for staff refreshments if they worked late on projects? Speaking of which, are there rules/guidelines to daily allowances on food for staff working late? Also, what about the treatment of staff lunches/drinks (team building, toasting success of projects, discuss project briefs)?

Sorry to diverge from main subject (not sure whether I should start another thread) but here goes:

- what would be the treatment on round sum cash taken by directors / employees for 'client entertaining' not supported by receipts?
- what is the treatment of Oyster card (tube travel in London) top ups for employees who 1) have cars and drives into work, but we know travels into town for meetings, and 2) who normally commutes into work by public transport, whom we also know uses their Oyster card for business purposes.


Thanks

RayWolfe

JasonLVC wrote: »

You cannot reclaim input tax on business entertaining so if your sales guy has gone out for a curry with a client, you can only reclaim the input tax relating to the salesmans food, not the client's.

Not sure this is entirely true. VAT cannot be claimed on entertainment. That means the bill, not part of the bill. The only feeding type VAT reclaim acceptable is subsistence type feeding.

00ec25

OnlyMe_08 wrote: »

for example if some materials for a job was purchased from say B&Q, - could VAT be reclaimed in this instance?

recoverable - shops can issue the "less detailed" (aka. small) VAT receipt: For purchases below £100 a less detailed VAT invoice will suffice showing the name, address and VAT number of the supplier, the date of the purchase, description of the supply, the total VAT inclusive amount and the rate of VAT.

Obviously over £100 you must ask B&Q for a (trade) full VAT receipt

Where there is mixed rate supply on one receipt (eg zero/exempt and standard) then the receipt must differentiate the items - on the less detailed receipt this can be as simple as an * against standard rate items with a footnote that * = standard rate @ 15%

Note - a credit card PDQ slip/folio is NOT a VAT receipt, which is why petrol stations often ask "do you want a VAT receipt?". The value of expense VAT claims I have rejected during audits because all they have is the PDQ runs to £000s as HMRC inspectors are rather pernickerty over the use of invalid receipts and getting it wrong can cost bigtime!

OnlyMe_08 wrote: »

How about staff entertaining, or food for staff refreshments if they worked late on projects? Speaking of which, are there rules/guidelines to daily allowances on food for staff working late? Also, what about the treatment of staff lunches/drinks (team building, toasting success of projects, discuss project briefs)?

read the HMRC guide to this re VAT here
(remember you cannot recover VAT on client entertaining, and if the staff element is incidental to the overall event then you cannot apportion the cost between staff and client) read HMRC re buiness entertaining here

For Income tax purposes then team building, toasting success of projects, discuss project briefs (what some still refer to as "awaydays") there is an annual limit to the value of these staff entertaining events and once over that, the rest are regarded as benefits in kind. (To avoid this the event should have a training theme and you will be expected to be able to prove this happened during the event). If your business is big enough to be engaging in these ask your accountant as you do have one right?

You can agree a formal dispensation with your tax office for payment of round sum amounts to employees (not sure about directors) without having to provide receipts - typically this is very low eg £5 (certainly less then MPs get)

OnlyMe_08 wrote: »

- what is the treatment of Oyster card (tube travel in London).

No Vat on travel so can't recover what's not there to start with!
If you mean can the business pay these as expenses to the employee without Income Tax issues , then see below

OnlyMe_08 wrote: »

top ups for employees who 1) have cars and drives into work, but we know travels into town for meetings, and 2) who normally commutes into work by public transport, whom we also know uses their Oyster card for business purposes.

1) where the Oyster card is used exclusively for business journeys only and is never used by the employee for normal commuting home to work or personal pleasure trips(!), then the cost of a generic top up can be paid without Income Tax/NI issues (clearly VAT is n/a), in such case the receipt required would be the purchase of the top up. (We have just sacked someone for abuse of this!). Note ideally a record of each trip should be held to demonstrate the trips undertaken were for business purposes only

2) little more complex - the business purpose can be claimed if the employee is physically out of pocket as a result of the journey , ie if their (I assume personally held) Oyster card has been deducted for the cost of the journey. What I am trying to explain is that if their Oyster incorportaes a season ticket covering their home to work route and any trips made using it during the day are "free" as they are included at no extra daily cost (eg zonal season ticket), then there is no extra cost to the employee and nothing would be claimable.

Strictly speaking to belt and brace it re Oyster cards in both 1 and 2 above, the employee should download the record of journeys and charges made to their Oyster card from the TFL website and submit this as a formal receipt for the journey. (But many companies turn a blind eye to this - mine included sadly)

JasonLVC

RayWolfe wrote: »

Not sure this is entirely true. VAT cannot be claimed on entertainment. That means the bill, not part of the bill. The only feeding type VAT reclaim acceptable is subsistence type feeding.

The official guidance from HMRC on this matter is as follows :-

VAT cannot be recovered on business entertainment expenditure. This includes the gratuitous provision to customers or clients of hotel accommodation, food and drink or tickets to events.

If a director or employee entertains a customer or client whilst away from the workplace location, the VAT on that part of the entertainment expenditure which relates to the director's or employee's own meal cost may be recoverable as subsistence rather than “business entertainment”. Subsistence expenditure can also include, for example, the cost of staying in a hotel when attending a client meeting. Input VAT under such circumstances would be deductible. Subsistence is covered in Notice 700, Section 12.

I probably didn't make myself clear enough. When we use the phrase "subsistence" that normally refers to an employee being given a fixed sum of cash (ie £10 per day) in which to buy food/drink, whereas from a VAT perspective subsistence means you can split a bill as oer my earlier post.

I'd usually recommend asking to split the bill so that the business gets two receipts for the same 'meeting/meal' so that the business can easily claim the VAT on the employees element and not reclaim the VAT on the guest/customer element.