09 December 2021
A common frustration for many small-to-medium sized enterprises (SMEs) is their seeming inability to claim VAT inputs on their employee expenses.
This often happens because they do not have the documentary evidence, in the form of expense receipts, to support their VAT reclamations.
And this can prove very frustrating for many SME owners and their finance managers, because, quite simply, it’s an opportunity lost. After all, the accrued effects of missing paper receipts can add up to a significant detriment on the firm’s VAT reclamation.
So, the way to manage and optimise VAT that can be reclaimed can be to better manage the overall employee expenses process, providing greater control for the business, and greater ease for the employee.
In the world of the paper-based, manual employee expenses process, there are many ways to reduce operating costs, save time and effort and – as an interesting side benefit – improve opportunities to reclaim VAT on employee expense inputs.
Traditionally, the world of employee expenses is littered with frustrating barriers. Paper receipts, which are often difficult to retain and find, spreadsheet forms which introduce additional errors, and manual line by line reconciliations all add up to a complex and unwieldy process.
So, it’s no surprise that many SMEs are turning to automated expense management processes, underpinned by smart software and apps which integrate with their management accounts packages.
These financial technology (fintech) solutions from providers like Expend provide smart, reliable and cost-effective management of expenses.
Cost effectiveness is important because whilst traditional expense management processes are recognised as frustrating, the combined costs of time and effort in administering this process, from an employee and management perspective, can easily be overlooked. And when it emanates as a detriment in your VAT claim position, the impact becomes real.
Smart expense management mobile apps enable employees to capture and process their expense related data at the moment of spend, rather than weeks later. So, by photographing their purchase receipts and submitting them to the app, they create a clear and credible record of their spend, which is automatically integrated onto the company’s accounts. From a VAT perspective, this enables a clear view of the VAT split on the receipt, and a rolled-up value of claimable VAT at the point of the quarterly return.
The Expend expenses app also enables finance teams and business owners to have full oversight of expenses in real time, and provides seamless reconciliation of expenses bills, include the VAT-able portion of personal expenses.
Very often the cost of providing an expenses management app is redeemed many times over by the savings in time and effort consumed by a manual, paper based personal expenses process. And providing the app for each employee can easily be outweighed by the improved position on VAT.
So, amongst the many benefits provided by an expense management app, consider the value offered to your ability to claim VAT on your employee expenses.
Disclaimer: This is not legal, accounting, or tax advice - it's simply a guide. If you need help, check with your accountant or contact HMRC directly.
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