VAT on travel expenses : 3 things to know
Generally speaking, yes, you can claim back value-added tax (VAT) on travel expenses incurred as part of your business. The HMRC rules are quite clear on the fact that only expenses which are “wholly and exclusively” related to the business can be considered tax-deductible business expenses. As long as a trip is conducted solely for the purposes of business, an employer or a self-employed worker can claim back the VAT. However, as with any rule, there are exceptions!
What travel expenses are covered?
Examples of travel that is required for the purposes of work include visiting clients, suppliers or partners at their places of work, scouting new locations for business developments, attending meetings, conferences and training courses, purchasing stock, providing a service, or visiting another branch or office within the same company.
If the trip requires employees to be away overnight, for instance, if they are attending a week-long conference in another country, VAT can also be claimed back on accommodation costs and “reasonable” subsistence costs (food and drink).
If, as an employer, you decide to reimburse applicants who attend your premises for the purposes of a job interview, you cannot claim back the VAT on these expenses. This is because HMRC does not consider these applicants as employees of the company. You cannot claim back tax for someone who is not an employee.
Can I claim back VAT on all forms of transport?
The short answer is no, not all forms of transport are VAT-deductible. Train tickets and aeroplane fares are what is known as “zero-rated” and do not include any VAT. Therefore, you cannot claim back any VAT on these forms of transport.
VAT on travel by personal vehicle (car, motorbike, bicycle, etc.), taxis and buses, however, can be reclaimed, on the condition that the company running the service is VAT-registered.
VAT and commuting
While VAT can be reclaimed on many travel expenses, the costs of normal commuting between the home and a permanent workplace are not considered to be business expenses and are not eligible for VAT deductions. The only exceptions are if you are commuting to a “temporary” workplace or travelling between two different workplaces.
VAT on food and drink
If an employee needs to be away from the workplace long enough that there is a “reasonable” requirement for them to purchase food and drink, then the VAT on these purchases can also be claimed back. The meal must be part of the trip itself and must be a reasonable amount in order to qualify as subsistence. Extravagant meals with fine wines are unlikely to qualify as a reasonable expense! Equally, meals that are part of a routine working day at the workplace cannot be claimed. HMRC publishes a list of eligible meal allowances.
Keeping track of expenses and VAT
As with anything tax-related, it is essential to keep meticulous records of travel expenses and any receipts or invoices for items on which you intend to claim back VAT. Receipts for travel tickets, accommodation, food and drink expenses should be kept, as well as a detailed travel log that includes the type of transport used, the beginning and end locations, the reasons for the trip and the number of kilometres covered. Paper records have long been used to keep track of business expenses for VAT purposes, but there is now a wide range of apps available which can simplify things for you and your employees.
Do you want to find an easier way to record, track and reimburse your employees’ business travel expenses and claim back the VAT on them? Do you want to make it simple to differentiate between what expenses are VAT-deductible and those which are not? Do you want to get rid of the need to collect paper receipts and invoices from your staff? Mooncard Corporate may be just the solution you are looking for.
Get in touch for a no-strings-attached demo and a tailor-made quote corresponding to your business needs.