Like any business, you and your staff are often out on the road visiting clients, suppliers, attending events etc. Business travel is something of a soft target for HMRC so what can you claim back?
The rules for recovering expenses incurred a trip can be something of a minefield. Apart from not knowing whether or not the is recoverable, another common problem is knowing whether the costs have them to begin with. You can generally reclaim the travel and subsistence expenses where a director, partner, sole proprietor or employee is away from their normal place of work a trip.
The rules for recovering VAT on expenses incurred on a business trip can be something of a minefield. Apart from not knowing whether or not the VAT is recoverable, another common problem is knowing whether the costs have VAT onthem to begin with. You can generally reclaim the VAT on travel and subsistence expenses where a director, partner, sole proprietor or employee is away from their normal place of work on a business trip.
Trap. The business must pay for the actual cost or a proportion of the actual cost of these expenses. You can’t reclaim VAT on expenses if you pay an employee a flat rate, e.g. £25 per night for buying a meal. However, if you pay for the exact cost of the meal and the employee keeps the invoice then you can reclaim the VAT.
What has VAT on it?
The general rule is that most things have them but some travel and subsistence expenses are zero-rated so there is no to reclaim. The following are zero-rated: takeaway sandwiches; rail, ferry, air and coach fares.
The general rule is that most things have VAT on them but some travel and subsistence expenses are zero-rated so there is no VAT to reclaim. The following are zero-rated: takeaway sandwiches; rail, ferry, air and coach fares.
Tip. However, there is VAT on taxi fares if the driver is VAT registered so it’s worth confirming this before trying to claim back any VAT.
Trap. Businesses often try to claim back the non-existent VAT on these supplies. HMRC will look for them during an inspection as it gives an easy assessment.
Meals, drinks and overnight hotel accommodation will have VAT on them so VAT can be reclaimed on these costs when staff are away on business.
If you have self-employed contractors who go for your and you treat them in the same way as your own staff, then you can reclaim the costs that they claim from you through your expenses system.
If you have self-employed contractors who go on trips for your business and you treat them in the same way as your own staff, then you can reclaim the VAT on costs that they claim back from you through your expenses system.
Sometimes a business trip might include costs which have elements of businessentertainment as well as travel and subsistence. For example, you send a salesman to a meeting in London and he stays overnight but he takes the client out to lunch following the meeting. Under the subsistence rules, the VAT on the employee’s hotel bill is recoverable, but the lunch with the client has an element of entertainment so you can only reclaim the VAT relating to his meal.
EU countries have a separate VAT system so you will be incurring VAT costs that you can’t claim on your UK VAT return. However, the EU has set up a system, operated by all member states, that allows businesses to recover VAT incurred in these circumstances.
Tip. The claim (in English) is made online through HMRC (see The next step ). Up to five claims per year can be made and you have nine months after the end of the year in which to make them. The EU tax authority then has four months to process the claim.
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