When to Reclaim VAT on Your Employees’ Expenses

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Typically in order for VAT to be reclaimed HM Revenue & Customs (HMRC) requires your business to have invoices or receipts in the name of your company. However, in certain situations, such as during business travel, this is not always possible. In these situations what should you do?

Have paper work!
When you or your employees are travelling on business it is possible to reclaim VAT on purchases up to £250, as long as you have a receipt or invoice showing the key details, such as the supplier’s name and address, nature of the goods supplied, VAT amount and the seller’s VAT number.
Top Tip. Ensure all of your employees are keeping records of their receipts. There are now many apps that can allow you and your employees to do this on the go, saving you time when it comes to processing your expenses later on, for example Expensify. Expensify cuts the time it takes to fill out expenses through allowing your employees to take a picture of their receipts on their smartphone. These pictures can then be instantly uploaded to the ‘receipts’ folder of the app, meaning that when they come to fill out their expenses they already have an electronic copy of their receipts in one place. The app can then produce expense reports, which your employees can email to an approver’s account.

No paperwork?
If you or your employees have been unable to obtain a receipt, you may still be able to claim VAT, but only in certain circumstances. Firstly, the purchase price must be £25 or less, and should be for one of the following items:

  • Coin operated machine
  • Off-road car parking charge
  • Toll charge
  • Phone calls via public pay phones

Top Tip. As with the receipt expenses, encourage your employees to keep up-to-date records of these expenses.

Car travel
As well as cash and card expenses, your business can also reclaim VAT on fuel costs, so long as your business is paying a mileage allowance to your employees for business travel by car. To reclaim VAT, your employees simply need to provide you with petrol receipts. To help with these expenses, HMRC have published their latest ‘advisory fuel rates from 1 September 2014’. In all of the above circumstances it is possible for you to reclaim VAT for your business. However, this is always upon condition that you reimburse your employees first for their expenses. Final Tip. Make sure that your company’s expense form includes a separate column for inputting the VAT amount for each receipt. This may sound simple, but will save you a lot of time when calculating how much VAT you need to reclaim.