Whatever size your business – whether you’re a one-man band or full-blown 50-person office, it can be tricky to know exactly what can and can’t be claimed back, when it comes to your business expenses and reclaiming VAT.
But there are some innovative and easy to use digital ways to do so – which is great to know, considering that VAT technology makes reclaiming VAT on expenses easier than it would be otherwise.
Because, it can be difficult knowing exactly where you stand when it comes to certain business expenses. For example:
Dining Outside While On the Job
Let’s say you’re visiting a client for lunch. You bring along one of your employees, and your client brings two other people. What can you claim back?
This is where things get a bit complicated. Unless the clients are overseas clients, visiting the UK, no tax can be claimed on their meals – the HMRC classifies this as under ‘hospitality of any kind’, or ‘business entertainment’ – and so unclaimable. For your employee, who is away from the office on a business-related task, the meal becomes ‘subsistence’, and not ‘entertainment’, and therefore you could claim it back – and the same would go for you as the employer.
Having to remember all those distinctions, as well as working out each person’s status is time consuming – luckily, there are nowadays some excellent examples of easy to use VAT technology which could do all that for you, automatically.
Christmas Parties and Office Festivities
Taking your employees out to Christmas is a great way to spread the seasonal cheer and make your employees feel appreciated – but tax-wise, where do you stand?
The good news is, that paying for employees’ meals (or other entertainment fees, such as theatre tickets, etc) is clearly a business expense – after all, you’re rewarding them for their hard work in the business. Even better – there is no monetary cap or limit on employees’ meals, as far as the input tax goes – but, should any of your employees bring along a non-employee friend, the non-employees’ meals cannot be claimed back. It becomes much more complicated whenever a partner of the firm, or the directors join you for your festive meal – and is just another example of where using a respected VAT technology would be recommended.
Although it may seem straightforward, when it comes to using subcontractors, tax matters can become slightly more complex – and it’s exactly the point where using an automated VAT technology service can save you valuable time and headaches trying to work it all out.
Should you agree to pay for certain aspects of their job (petrol costs to/from the job, meals, hotel costs, for example) you need to know that not everything can be claimed back.
As with the examples above, anything related to ‘subsistence’ – provided the subcontractors receive the same definition/treatment as employees working the same job – can be claimed. Anything other – travel expenses, including petrol, and hotel stays – can’t be.
While taxes don’t have to be taxing, trying to unravel the many mysteries of HMRC’s rules can waste a lot of time – we hope the above clarifies matters for business owners, somewhat!