For all of the 22 years we have been providing bookkeeping services to clients we have been submitting monthly and quarterly VAT returns. So we know a bit about VAT! We are not VAT experts by any means and will advise you to get advice from a VAT specialist if we don't know the answer to a particular question.
However for the majority of businesses VAT is straightforward when you have the knowledge and experience to know what you can and can't claim VAT on.
Over the years we have dealt with several VAT enquiries on behalf of our clients which have generally been due to unexpected or ongoing refunds. All of these enquiries have been dealt with promptly and easily because we are clear with our clients that we must have appropriate VAT receipts for all purchases we claim VAT on and that we only claim VAT on purchases which are for the business.
We know requesting a receipt for every purchase can be annoying but it ensures that we are confident that we can produce any receipt we have claimed VAT on if HMRC ask for it.
When doing an enquiry HMRC will always ask for a copy of the VAT return and often up to 10 of the largest sales and purchase invoices. They will check these to make sure they are made out to the company and have a VAT number on them. So you might think that claiming VAT on small purchases might not matter if you don't have the receipt as they won't ask for it. But a few years ago an HMRC inspector came on site to do the inspection and asked for a fuel receipt from 4 years previously. It was found within minutes and was a proper VAT receipt (not the card receipt).
VAT cannot be claimed on card receipts because there is no VAT number and no description of what was purchased. Fuel receipts particularly may have non allowable expenses on them - subsistence for example when your base is just around the corner, or tobacco. If we are not provided with proper VAT receipts for fuel purchases we will not claim any VAT, so you could be losing out on VAT to claim back.
Receipts are so important. Not just for VAT purposes but for identification of the purchase. All purchases need to be allocated to an account code so that you can identify the level of costs for aspects of your business month on month or year on year.
It is every businesses' responsibility to be able to prove their business expenses, whether VAT registered or not. If we do your bookkeeping that is why we will ensure you provide every receipt so that we can claim back all the VAT possible. It is our job to make sure that everything is accurate and that if a VAT enquiry occurs we have no concerns about providing the information they ask for.
We have had 2 VAT enquiries in the last 3 months and both have been settled quickly and without penalty and this indicates that HMRC are more reluctant now to refund VAT without checking how and why that refund has occurred.
In summary
1. Always obtain a VAT receipt (a card receipt is not acceptable for claiming VAT)
2. Ensure all purchase invoices are made out to your business and not to someone else (you can't claim VAT if they are made out to someone else)
3. Do not claim VAT on any expenses which are not wholly and exclusively for the business
4. Do not claim VAT on any income or payments which are outside the scope of VAT (wages, HMRC payments, grants, etc)
5. Ensure you are charging the correct VAT on your sales and you are providing your customers with a VAT receipt
