Over-zealous VAT compliance?

Over-zealous VAT compliance?

Didn't find your answer?

This is an extract from a recent Suffolk County Council memo to all employees:

"HM Revenue and Customs have recently clarified the position to us with regards to the reclaim of VAT on business mileage travelled in employee’s private vehicles.

Provided a VAT fuel receipt is attached to the travel claim form that is submitted to claim payment for the travel undertaken, the county council will be able to reclaim the VAT element of the fuel used on the travel undertaken on council business.

Whenever fuel is purchased for your vehicle simply keep the receipt and use it to attach to your travel claim.

From 1 September 2007 all travel claims submitted for payment must have a VAT receipt attached to enable the reclaim of VAT to be made."

I may be being naive, but is this standard practice? It seems a complete waste of time as the fuel receipt may have nothing to do with the actual miles travelled which are being reimbursed at the standard 40p per mile. Surely the VAT is a standard proportion of the 40p, and the amount on the VAT invoice is irrelevant. Is this just a rogue/over-zealous tax officer's whim, or do large employers really have to put up with this unnecessary red tape?

Philip Gorrod

Replies (4)

Please login or register to join the discussion.

avatar
By stephenkendrew
03rd Oct 2007 12:48

since January 2006
This has in fact been a requirement since the beginning of 2006 in order for VAT to be reclaimable.

It was something to do with previous policy not complying with European Law since the supply of fuel was to the employee rather than the employer (who is reclaiming the VAT).

The VAT office said they will still allow employers to reclaim the VAT on the fuel element of mileage claims as long as the employer retains sufficient petrol receipts to cover the claim.

See here for more details:-

http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true&_pageLabel=pageVAT_ShowContent&id=HMCE_PROD1_024832&propertyType=document#P69_5662

Thanks (0)
avatar
By User deleted
03rd Oct 2007 13:33

Nobody Told The VAT Officer
This time last year I happened upon identical instructions, via a relative, from Wiltshire County Council to its employees. Broadly, in order to claim £40 of mileage expenses they now need a minimum of £40 (gross) of VAT receipts clipped to their expense claims.

Armed and dangerous in that knowledge, I cited the new rule during a client company's VAT visit in February of this year. The visiting officer took issue, having never heard of such a thing, and left the director in no doubt that I was talking nonsense. She advised him to go ahead and claim VAT on employees' 2006 mileage expenses in spite of the absence of VAT receipts. Made me look rather second-rate!

Thanks for the link Philip - I'm going to email it to that VAT officer this afternoon. And to the client, with a told-you-so note. Normal credibility levels should be resumed shortly.

Thanks (0)
avatar
By PhilipJG
03rd Oct 2007 17:10

Daft or what!
Thanks Stephen - so SCC is right after all. But what a complete waste of time - another bent banana from Brussels!

Thanks (0)
avatar
By theaardvark
04th Oct 2007 13:05

It's a bit of a fudge.
This is the UK operating a bit of a fudge as a favour to UK businesses for once.

Strictly speaking, under EC legislation because the fuel is not supplied by the Petrol Station directly to the business, the business is not entitled to recover any VAT at all. The UK Govt has always felt this unfair and allowed businesses to recover VAT on fuel element of the 40p mileage rate.

However, in 2003 the European Commission took the UK Govt to Court and forced them to change the rules.

The UK Govt. have introduced this requirement to provide VAT invoices to the business as a kind of temporary "work-around".

Everybody knows that it does not really meet the requirements placed on the UK Govt by the Court ruling and that, eventually, the EC will catch up with them and take them to Court again. At which point it is likely the Govt. will be forced to stop the VAT reclaim completely.

In the meantime, HMRC Officers tend to apply the rules with a "light touch". Show them a nice big pile of invoices and they'll probably be happy.

Regards

Paul Taylor
Senior VAT Consultant
Dains

Thanks (0)