Don’t Leave that VAT Money on the Table – Focus on the UK

Business travelers. They’re a busy bunch. Besides their busy entrepreneurial lives back home, when traveling, it could be a constant race to that next meeting, the next train, taxi or airplane. Did they pack their electric shaver? Pack their wrinkle free shirts for those back-to- back meetings in London in the Morning, Berlin in the Afternoon, Dublin the next Morning?

It could be a harrowing experience. But it doesn’t need to be. There are ways to keep it together.

Companies with many of their execs, salesmen always on the road and/or in the air need to keep it all together on their part as well. One of the things that gets overlooked many times is reclaiming VAT expenses their traveling employees incur. It could be a royal pain and very time consuming, one of the reasons so much VAT money is not recovered.

One of the major reasons for VAT going unclaimed are overwhelmed accounting departments, especially when most of them use manual processes to reclaim VAT, leading to disorganization, such as lost receipts, unsigned documents, etc…

Adding to this is a lack of understanding of the technicalities regarding taxation in those countries where businesses are trying to reclaim VAT. On top of all this, language barriers and distance are also primary factors.

Even when corporate accounting departments are sure they have meticulously filled out all the necessary forms, have been in contact with all the appropriate administrations, have signed whatever needed to be signed, have attached all the documents necessary, VAT reclaims can take up to 3 months to process and be reimbursed for.

In many cases, companies have better luck crossing their fingers.Companies ultimately need a way to automate this complicated process.

According to an OECD study released a short time ago, slightly over 20% of businesses are not able to reclaim any foreign VAT business-related expenses. This is mainly due to the inability to communicate with the foreign tax authorities and the overwhelming amount of confusing and complex procedures.

Collecting VAT is a huge source of income for countries and the many complicated rules can be more understood in this report (or make it more complicated) The report was developed with a very broad range of actors outside the OECD such as local tax authorities and the global business community.

Here are just a few examples of how confusing it can be to calculate vat in the UK.
  • Since 50% of your traveling employee’s mobile phone calls are private calls not related to business, that’s all you can reclaim. Your company can claim 50% of the VAT expenses on the purchase price of making the calls and the service plan
  • If your employee works from his or her home, and their office occupies just 15% of the total space, then businesses can reclaim 15% of the VAT on their utility expenses such as electricity.
The UK consists of Great Britain and Northern Ireland. Aside from the land border that Northern Ireland shares with another sovereign state, the Republic of Ireland, the UK is surrounded completely by the Atlantic ocean. The 2016 census counted a population of 65.5 million people.
The UK, a member of the EU, UN , NATO and G8 uses the oldest currency in the world today, the British Pound.
Let’s take a look at some average UK business expense numbers.
  • Business trip duration: 5 Days
  • Total cost excluding flights: $2100
  • Number of Taxi rides on a business trip: 13
    • Average cost: $42
  • UK Hotel per night: $275
  • A meal: $32
Here are some basic phrases in English for the UK business traveler when purchasing an item covered by VAT. When in doubt, it is wise to always ask.

Please give me:

  • An original VAT invoice
  • With my company name and address
  • VAT rate and value shown

This can all change of course if and when the UK leaves the EU. Be sure to check our blog for updates.

For the complete story on recovering VAT in the UK and other European countries, download our eBook.