UK Tax Essentials

An Easier Way To Process VAT On Business Expenses

A business man is shown processing VAT as a business expense

Technology is here to ease the burden of most manual processes that turn small tasks into a headache. One such job is VAT processing. Automating VAT is the use of intelligent and knowledge-based software to compute VAT accurately and efficiently.

Processing VAT on business expenses requires adherence to numerous government rules that can be hard for any tax accountant to keep up with. The complexity of the process results in lost reclaims and non-compliance that can attract hefty fines.

Common pitfalls when processing VAT on business expenses

VAT on entertainment

You cannot claim back VAT on entertainment expenses. There is an exception, however, to staff expenses that are subject to staff entertainment guidelines. For instance, entertainment costs incurred by employees in the course of company-related duties are reclaimable.

International trading

A lot of people make errors when computing VAT for international transactions. For instance, VAT does not apply to goods purchased from countries within the EU. Imports from countries outside of the EU is subject to import VAT but is reclaimable as input VAT.

The Validity of the VAT receipt

Ensure that every receipt you take shows VAT for it to be valid. If it does not, the item could be VAT exempt or your vendor may not be VAT registered which means you cannot make any claim.

A couple of business partners are shown calculating VAT as part of the business expenses

Personal supplies

VAT is not claimable on items that are for personal use. For those that have an element of both personal and business use, you can claim VAT for the proportion of business use using careful calculation.

Poor record keeping

You cannot claim VAT if the receipt related to the expense is missing. For instance, reclaiming VAT on business mileage is only possible with a receipt of the fuel purchased.

Expenses related to VAT-exempt supplies

For goods you supply that are exempt from VAT, you cannot reclaim any VAT on expenses related to these goods.

The benefits of using VAT management software

It saves time

The process of computing VAT on business expenses is not just complicated, but it is time-consuming. It calls for in-depth research by the tax staff with regard to guidelines related to various types of expenses. In the end, a lot of time is used on a single task that could have been channeled elsewhere.

Automating the task of processing VAT on business expenses prevents errors

Complete compliance to VAT law

There are consequences of non-compliance to VAT laws. Achieving full compliance is difficult when using a manual system since laws regulating VAT are always changing. These laws also vary among different states. Automating your VAT ensures the process follows every relevant local and international law.

It minimizes errors

VAT software leaves no room for errors. It checks for validity and eligibility of every receipt and cross-checks with third-party sources. It does not overlook any expenses. The thorough process ensures that no VAT is left unclaimed. The accurate process translates to accurate and reliable financial reports.

Automating the task of processing VAT on business expenses prevents errors that occur from improper recording and non-compliance to VAT guidelines and rules. It makes the process fast and thorough reducing the time used in research and following up on errors. With automated VAT processing, you can be sure of a boost in your reclaims.

About the author

Thomas Henderson

Thomas worked as a consultant in personal finance in the UK for 18 years. He has found a passion in sharing his experience on familymoney.co.uk

Thomas also takes pleasure in woodworking, reading and observing stock market trends.

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