Petty VAT
You’ve paid for business expenses out of a cash advance from your company. What sort of receipt do you need to avoid the VATman later reversing your company’s claim for the VAT included in your expenses?
Claiming input VAT
Recap. If you’re registered for VAT you can generally offset any VAT your suppliers have charged you (input VAT) against any VAT you in turn are charging your customers (output VAT). This offset is given by you putting a figure in the Inputs box on your VAT return. This self-declaration method is on the condition that you keep specific evidence to back it up. The regulations look for a “valid tax invoice” and stipulate exactly what information has to appear on it. If any of this information is missing it is not a valid invoice and you have no legal right to reclaim the input VAT.
In practice. Sometimes obtaining a detailed invoice can be time consuming. However, the VATman has introduced some concessions in response to the problems of obtaining a detailed tax invoice in certain circumstances. For example, you can use receipts from shops or other retail outlets if, as a minimum, they show: their name, address, registration number, date of supply, a description of the goods or services, total amount payable including VAT and the rate of tax in force at the time of supply. This only applies if the total spend is less than £250. But what about expenses generally?
Expenses
Subsistence. Receipts for subsistence whilst travelling, made out to an employee rather than the business, are still acceptable. In fact if you’re paying for them out of a cash float it’s the company’s money that is being used so there is no question of the company reimbursing you for your own liability. But what about a quick lunch with a contact, isn’t that business entertainment? The answer is partly entertainment and partly subsistence. The main purpose of the meeting was business, entertainment was secondary. Therefore, the VAT on the subsistence relating to you can be recovered.
Tip. The VATman will allow you to reclaim a proportion of the total VAT on a bill. He will not insist that you identify who had what starter and main course. (The VATman admits to this point in Notice 700/65/96, pars 2-5.)
Telephone calls. No invoice is required to support £25 or less spentontelephone calls from pay phones.
Parking. You also don’t need a valid VAT invoice for off-street parking. A receipt with their VAT registration number on is sufficient for amounts less than £25.
Taxis. The supply of taxi services is taxable but most self-employed taxi drivers are not VAT registered, so when you get a receipt for your expenses claim ask the taxi driver if he has charged VAT. Plus, don’t forget to claim for the tip you gave.
Tickets. Passenger transport in a vehicle, ship or aircraft designed or adapted to carry not less than ten people (including the driver) is zero-rated. That means there is no VAT to be claimed and so you don’t need a VAT receipt per se.
Consequences. If your total error is less than £2,000, you adjust the return yourself. For larger errors a voluntary declaration should be made to the VATman. This should avoid any misdeclaration penalties which are imposed for large or repeated errors discovered by him.
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