Once you understand the basics, many businesses find VAT reasonably straightforward. But there are some tricky areas where it is easy to make mistakes.

There are a couple of important areas where more effective management can help you to avoid unnecessary costs and ensure that you claim the correct amount of VAT.

This issue of Employee Expenses News covers four areas that can be confusing when the reclamation of VAT is considered:

Keeping Receipts Private mileage on company vehicles Claiming VAT in the EU Third Party expenditure

Do I need to keep my receipts?
Yes. You must keep VAT receipts for all purchases, to reclaim the tax you have paid.

• If you lose a VAT receipt, you should get a duplicate. You should not claim VAT if you do not have evidence for the expenditure.
• If a receipt shows product codes rather than descriptions, you must keep a copy of the product list. EXAMPLE: If your restaurant receipt does not detail your purchases, you should keep a copy of a menu that makes reference to the associated codes.
• Watch out for arithmetical errors on receipts. If you are given a less detailed invoice which includes VAT but does not display it as a separate item, confirm the items purchased are subject to VAT and calculate what you can reclaim by multiplying the amount on the invoice by (7/47), not by 17.5 per cent.

Our company vehicles are used for private mileage (including the trip to work), Can I claim back VAT on this usage?
Yes. If you use commercial vehicles in your business you can claim back the VAT on fuel and pay a 'road fuel scale charge'. This charge compensates for the private use of the vehicle which includes travelling to and from work (this is not considered as business travel).

Road fuel scale charges mainly benefit businesses where vehicles build up high mileage for private use. Otherwise, it may be more worthwhile logging your business and private miles separately and claiming VAT solely on the business miles. The following table sets out the new fuel scale charges which apply from the start of the first prescribed accounting period beginning on or after 1 May 2005.

NOTE: Road fuel scale charges are not compulsory, but are introduced to give an employer an extra option of claiming back VAT on road fuel. By choosing not to pay the road fuel scale charge, you cannot claim back all of the VAT on fuel - only that which has been used strictly for business use.

I am based in the UK but recently incurred business expenses on a trip to Europe; can I claim back the VAT?
Yes. You can reclaim VAT incurred on expenses in most European countries provided you are registered for VAT in the UK, still have the receipts and your company does not have a branch in that country nor conducts business there that is liable to VAT.

Your claims must be made no later than six months after the end of the calendar year in which the expense was incurred. As with UK expenses you must have a valid receipt; with some internet companies (particularly those residing in the US ) VAT receipts are not issued so VAT cannot be reclaimed.

EU VAT charges are detailed on the table below:

I have purchased material on behalf of a supplier; can I claim back the VAT?
No. If you settle a charge on behalf of a third party, you will not be able to reclaim VAT.

• VAT can only be reclaimed by the recipient of the material. EXAMPLE: Auto-Lease, a Dutch car leasing company, arranged fuel credit cards for customers, whereby supplies of fuel were claimed to be made to Auto-Lease and then on to the customer. Auto-Lease sought to recover VAT charged on such supplies. The EU Court held that the fuel was supplied to the customer, not to Auto-Lease, and therefore that VAT recovery was not possible.
• Consider settling the net value only. It may be worthwhile for your supplier to pay the VAT and then reclaim it in their own right.

If you would like to find out more about how expenses can help you manage your VAT reclamation, simply call the expenses team on 01522 881300 or click here

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Top 5 reasons to choose expenses

We asked our expenses customers to give us their main justifications for purchasing expenses and these are the top 5 reasons given to proceed with our solution:

1. Simple and Flexible - expenses is quick to implement and fully flexible, allowing you to emulate your existing employee expenses process electronically. expenses has been specifically designed to be intuitive so there is not a requirement for expensive employee training.

“WYKO recognised the simplicity of the system for all users
and the minimal requirement for employee training during role out.”
John Weston, Group Operations Director, WYKO

2. Removal of Paperwork - The electronic expense form arrives at the accounts department ready for payment. expenses correctly calculates all VAT and expense totals to be paid and reclaimed. Once the payment report is generated by the Accounts Department, the expense claim information can be fed directly in to your payroll and/or general ledger.

“The main benefits to NHS PaSA are the speed of reimbursement to claimants
and the lack of paperwork .”
Clem Brohier, Head of Finance, NHS PaSA

3. Access from any where at any time - expenses allows your employees to input their claims faster than with a traditional paper based or spreadsheet system. Claimants will save around 50% of the time they spend entering expenses, as claims are entered online and can be accessed from anywhere at anytime.

“Being web-based meant that expenses was highly adaptable and
could be used by employees at any time and from anywhere in the world .”
Carl Pearce, Company Secretary, Notts Sport

4. Timesavings - The time demanding administrative process represents a significant cost, and careful management can help to reduce this: Employees typically take 30 minutes filling in their expenses form, Line Managers typically take 10 minutes checking each form and Accounts personnel typically take 10 minutes processing each form. expenses can save your organisation 50 minutes per expense claim, time that can then be allocated to other projects.

“As financial controller I was increasingly aware that my finance assistant was
spending a lot of time putting claims on to the ledger, time that I felt could be better spent.”
Diane Makepeace, Financial Controller, SIA

5. Reporting - expenses allow you to produce summary reports that can be organised to your specifications, for example employee, cost code or department, your organisation requires.

“We weren't looking for an expenses management product,
but after seeing a product demonstration we decided that it would be good
for improving expenses submission and reporting.”
Susan Leeming , Cashier Supervisor, Stylo Barratt Shoes

If you have any questions regarding how your organisation benefit from expense automation, do not hesitate to call the the expenses team on 01522 881300 or click here

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EMA - A secure way to manage expenses?

In today's high-tech and interconnected world, each application used by an organisation needs a well thought out security policy. Our expenses team is committed to ensuring that the users of our product can be confident that they are working in a secure environment, protecting both personal and non-personal information from loss, misuse and unauthorised access, disclosure, alteration or destruction.

The expenses security policy explains how our EMA solution manages the security and control of:

• User Passwords
• Authorised Access
• Hosting
• Data Backup
• Transmissions
• Internet Cookies

The expenses security policy defines the procedures, guidelines and practices for configuring and managing security within the solution. Our security policy, allows organisations to be confident that Software Europe ensures continuity of practice, integrity, security and privacy of the computer data.

To find out more information about how expenses will fit in to your corporate security policy, please call our expenses team on 01522 881300. Alternatively you can request that a member of our team contacts you by clicking here

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