It’s hard to know exactly what you can and cannot go about reclaiming VAT-wise. Yet, sometimes, there are some easy to avoid common mistakes which makes the process even harder.
Here’s a quick overview of some of the biggest mistakes you can make.
Reclaiming VAT for Metered Parking
You may not know it, but on-street meter parking isn’t actually subjected to VAT – so you never receive a proper VAT receipt when you use one. Without one of these, you can’t reclaim any VAT.
The solution: Park in a sheltered garage instead. If these are private businesses, they can generate a VAT receipt to give you.
Reclaiming VAT on Business Entertainment in the UK
Unless there are specific circumstances surrounding it, or business expenses which include food, which count as ‘sustenance’ (in some circumstances), you can’t reclaim VAT on this either.
The solution: Get to know your business categories thoroughly. What may be one type of expense might also be another – which you can go about reclaiming VAT on instead.
Reclaiming VAT Twice on a Purchase (e.g. Human Error)
Payment requests are not valid as tax invoices, and as such, this should be made clear on any payment request received. A business needs to have a valid tax invoice or receipt in order to correctly and legally go about reclaiming VAT back.
The solution: Make sure all payment requests clearly state that they are NOT VAT invoices, and make sure that once you’ve paid, you receive a correct tax invoice or receipt. If you don’t, keep chasing until you do.
Charging VAT Wrongly
The standard rate of VAT should be charged by a business, unless there are specific circumstances around the purchase or price of VAT charged.
The solution: It’s quite simple, really – make sure you know if you have any extenuating circumstances affecting the rate of VAT you charge and if not, then charge the standard amount of VAT.
Reclaiming VAT on Mileage (But Not Keeping the VAT Receipt)
This is a VAT cardinal sin: ever since January 2006, business are required by law to keep VAT receipts for petrol bought as a part of business expenses.
The solution: Needless to say, make sure you keep your tax receipt. Yes, they can be annoying when they’re all piling up, so find somewhere handy – the glovebox or another compartment – to stash them until you need them.
Not Paying VAT Reclaimed on Purchases If a Supplier Has Not Been Paid In Over 6 Months
If a business has failed to pay a supplier invoice in a 6 month period or more, the VAT recovered by that supplier is duty bound to be paid by the business to the MRC.
The solution: This one is very straightforward – make sure you pay your suppliers on time. It’s basic business sense, and improves your relations with suppliers. Otherwise, you might just find yourself facing an angry supplier wanting payment – and a delightfully smug HMRC, also waiting for payment!