Value added tax issues continue to be an area of confusion among businesses and individuals alike, explains Concur director Matt Lewis.
VAT was introduced more than 40 years but has grown increasingly complicated as HMRC changes and introduces new rules and regulations.
As VAT is the second largest income for the UK government, scrutiny will only continue to increase as the government works hard to clamp down on any tax irregularities.
HMRC recently introduced the extended verification process (EVP) aimed at reducing tax evasion and avoidance, while ensuring VAT compliance. This means that now more than ever, businesses and individuals must make sure they are accurately reclaiming VAT on expenses.
VAT guidelines continue to change and evolve and there are many rules that the majority of businesses are unaware of. However, being aware of the ins and outs of VAT payment regulations can help you stay ahead of the game.
We’ve outlined some top rules you might not know about VAT to help you claim as much VAT on expenses as possible – while keeping the tax man happy.
- Park your car on a road - Paying to park on a road is not subject to VAT, whereas parking your car off the street or within a multi-story car park is.
- Eat your food on the go - Food continues to be a grey area as whether VAT is charged or not often depends on where you are planning to eat the food! If you eat your lunch at a café and order a sandwich and a bottle of water, you will be charged VAT for both items. However, if you get your food to take away your sandwich will escape VAT payment – but not your water. Therefore, if you go for the cold food takeaway option, it should, in theory, be cheaper. Bear in mind, however; foods like confectionary and crisps are subject to VAT whether you take them away or not.
- Want to buy a gift? – keep it cheap - Gifts for employees, such as for birthdays or special occasions are eligible to reclaim VAT on as long as the sum is less than £50 (not including VAT). However, this can only be done once every 12 months. If you buy more than one gift for an individual make sure the total sum is still less than £50. Therefore, it’s good to send a gift but being too generous means VAT won’t be recoverable.
- Car rentals – leasing is the way to go - If you want to recover VAT on providing employees with a car, make sure to lease the car for the employee instead of buying it. A company can reclaim 50% of the VAT charged on lease rentals but none of the VAT on an outright purchase. If it’s a short term car hire to cover a business trip and the rental is less than 10 days, the full amount of VAT can be claimed. However, make sure the car has not been used for personal use at any time or the 50% restriction will apply as it does for hire periods lasting more than 10 days.
- Entertain your employees more than your clients - Entertaining employees means that you can recover VAT unlike entertaining clients on which you cannot recover the VAT paid.
Matt Lewis is the EMEA compliance director at Concur where he focuses on making sure that VAT, HMRC and compliance are high on the corporate agenda and an integral part of the Concur solution.