Reclaiming VAT on staff expenses
When you or your staff are out on business, you will most probably incur out of pocket expenses such as car park charges where you do not receive a proper invoice. Can your business reclaim the VAT?
Your business can reclaim VAT on its expenses that it repays to its staff, subject to certain conditions.
The right invoices
In order to claim back VAT paid on business expenses HMRC expects you to have a proper invoice in the name of your business. However, it acknowledges that it’s not always possible, especially in situations where the purchase was impromptu, say when it’s made by you or your staff whilst out on business.
Less detailed invoices
HMRC permits VAT to be reclaimed on expenses of up to £250 so as long as you have an invoice showing the key details, i.e. the name and address of the supplier, nature of the goods supplied, the rate of VAT and the seller’s VAT number. Typically, this type of receipt or invoice is produced by shops and garages.
No paperwork received
For some expenses HMRC allows you to reclaim VAT without an invoice. The cost must be £25 or less and applies to the following types of expenses:
for off-road car parking.
those made using coin-operated machines.
toll charges for tunnels, bridges, etc; and
for phone calls using public pay phones.
If the invoice does not show the split between the net cost and the VAT part, then you can work out the VAT element to claim by taking one sixth of the total amount.
One further requirement to allow the VAT to be recovered by the business is that the business must actually repay the person who first paid for the expense.
Where your business pays a mileage allowance to you or your staff for business travel e.g. by car, it can reclaim VAT on the part of the allowance that relates to the fuel costs. HMRC publish a recommended rate per mile according to the engine size, or you can use your own mileage rate so as long as it is fair and reasonable .To reclaim the VAT, you or your staff must provide your business with sufficient petrol receipts at least equal to the value of the mileage claim.