As you get ready to submit your VAT return, you might be wondering about which business expenses you can legally claim VAT back on.
Can you Claim VAT on Travel Expenses?
You can. But there are rules about the sort of travel expenses that are eligible. Let’s take a closer look at which travel expenses you can and cannot claim VAT on. Government rules state that you can usually claim the VAT on goods and services you purchased for use in your business.
This does extend to travel. You’re allowed to reclaim VAT on employee travel expenses for business trips.
The government classes an employee as:
- Someone you employ directly, though not someone you employ through an agency.
- Directors, partners, and managers.
- Anyone who helps run an event, including stewards.
So long as someone fits this criteria and you don’t pay them a flat rate for expenses, you can reclaim VAT on their travel expenses. This does mean that self-employed individuals and contractors can reclaim their own travel expenses, as they’re technically the managing directors of their own company.
What can you claim for?
Can you Claim VAT Back on Train Tickets?
No, you cannot claim VAT back on train tickets. Train tickets are zero-rated, so as VAT is never charged, you cannot claim it back. Because of this, you should mark train ticket purchases as ‘zero rated’ in your accounting software similar to insurance and bank charges.
Can you Claim VAT Back on Mileage?
As long as you’re VAT registered, you can claim VAT back on mileage allowance paid to staff. However, you can only claim VAT back on the fuel portion of the allowance, not the ‘wear and tear’. The advisory fuel rate is updated quarterly by HMRC and will be needed to work out how much VAT you can reclaim.
Can you Claim VAT Back on Flights?
Similar to train tickets, flights are zero-rated so there is no VAT for you to claim back. Before claiming VAT back, make sure you have your receipts and if there is no VAT added, then you cannot attempt to claim it back.
Can you Claim VAT Back on Taxis?
This is one of the only forms of transport what you can claim VAT back on. However, you can only claim VAT back if the taxi company is VAT registered.
Can you Claim VAT Back on Hotel Accommodation?
Yes, you can claim VAT back from accommodation that your employees use for business trips as part of their travel expenses.
Can you Claim VAT Back on Meals?
Yes, as long as they class as ‘subsistence’. If meals are part of a business trip and ‘reasonable’ then that would class as subsistence. However, if you bought an employee lunch at their usual work premises, this wouldn’t qualify.
Can you Claim VAT Back on Entertainment?
You cannot reclaim VAT on “entertainment costs”. So this means that, if you travel to a city for business reasons, you can usually reclaim VAT from the cost of your accommodation and food. But if you decide to go and see a film while in the city, you cannot reclaim the cost of your ticket and popcorn.
However, the government stipulates that you cannot reclaim travel expenses for “self-employed people who are treated as employees”. This is IR35 law coming into play. Head here to read more about HMRC and “disguised employees”.
There are other individuals who the government doesn’t class as “employees” and for whom, as a result, you cannot reclaim travel expenses. These include any shareholders not directly employed by the business, along with any pensioners and former employees. Job applicants are also exempt. So if you decide to reimburse an applicant who’s had to travel for their interview, you cannot reclaim the VAT on these expenses.
Can you Claim VAT Back for Commuting?
There are different rules for reclaiming VAT when it comes to cars. You can only claim back VAT on the fuel cost for journeys undertaken for business reasons. Unfortunately, this does not include commuting. Instead, HMRC defines “business travel” as any travel from your workplace to a temporary workplace, or any travel between two different workplaces.
In some circumstances, it’s also possible to reclaim VAT on the cost of buying a new car. Head here to read the full government guidelines.
Worried About VAT?
The rules about what you can and cannot reclaim VAT on are actually quite straightforward. The only problem is that there’s a lot of them. Plus, it’s only natural to worry about grey areas. What if you inadvertently try and reclaim the VAT for a transaction that’s not eligible?
This is why it’s important to keep detailed records. If you’re 100% transparent and accurate when it comes to your expenses, then neither you nor HMRC should be in any doubt over any aspect of your VAT return.
But if HMRC does have any doubts, it may trigger an investigation into your finances. That’s why no self-employed worker should be without some form of insurance cover. Insurance can cover your legal expenses in the event of tax investigations.
At Tapoly, we specialise in providing comprehensive and affordable insurance for self-employed workers. Our flexible tailored cover starts at just 50p a day, and you can get a free quote in minutes. Head here to learn more.
If you have any questions or would like to discuss your options please contact our Tapoly team at info@tapoly.com, call our help line on +44(0)2078460108 or try our chat on our website.