Vat Invoices. - The Book-keepers Forum (UK)

Harps · Veteran Member

Vat Invoices.

semsley · Guru

If the invoice is not in the name of the limited company the limited company cannot claim the VAT on it.

Likewise if an item is bought by a personal credit/debit card the VAT cannot be reclaimed on that purchase.

Shamus · Forum Moderator & Expert

Hi Harps,

you've lost me...

Can you reword this question please. I need clarification as to whether you're talking about sales invoices, purchase invoices or a VAT return.

When you're talking about limited companies the limited company is a totally separate legal entity to it's owners. On occasion it is necessary to purchase thing for the company and be reimbursed by the company for the purchase.

With the hotel accommodation if the director / employee did not have a company credit card then they could use their own credit card, get a VAT receipt from the hotel and be reimbursed the money by the company in exchange for the receipt. This will show the money coming out of the company bank account.

The director / employee must prove that the stay in the hotel was wholly and exclusively necessary for company business. If this is not the case then it will not be an allowable expense.

Company directors have to realise their fiduciary duty of care for their companies and realise that their is a distinct differentiation between the companies assets and their own.

The VAT invoices must have the VAT number on them regardless of the amount. The VAT number relates to the company, not the director. I'm a bit confused as to what his name and address are doing on the invoice at all. (We are talking about a sale and not a purchase aren't we?).
Sorry, bit confused by the question. so could do with a bit a clarification as to what exactly your asking.

Shaun.

Harps · Veteran Member

Hi Shamus.

Sorry if I haven't made it clear. I am talking about purchase invoices. All items were purchased on the company credit card.

All of the purchase invoices have the vat number on but I am concerned that the address that has been put on the invoices is the directors name and personal address and not the companies name and address. All items have been purchased for use in the business. As the items are less than £250, I understand that the invoices only have to state the sellers name and address details but just wanted to clarify that if it does state the buyers address (ie. my client) should it be their company details and not their personal details.

I am wanting to complete the vat return and wanting to know if I can claim VAT on the above purchases.

Regarding the hotel stay, it can be proved it was for business purposes but again the invoices were made out to the director and employees and not the comapny.

Hope that makes it clearer.

Shamus · Forum Moderator & Expert

Hi Sheila,

think that we're basically saying the same thing but could do with some clarification on what the question is that's being asked.

Not in total agreement over the use of private credit cards though as I know of many cases where the director buys something for the company. For example, printer ink cartridge from Tesco's as it's the only place open at three in the morning and then charges the invoice to the company.

VAT on the purchase would be allowable in that instance as the goods are purchased wholly and exclusively for use in the company even though the invoice wasn't actually to the company. The company accounts of course show the payment coming out as the director is reimbursed for the purchase.

Shaun.

Shamus · Forum Moderator & Expert

Cheers Harps,

this director really doesn't make it easy for himself does he!

I stand to be corrected by Sheila but it is my belief that for the hotel the director can be reimbursed by the company and the company can claim the VAT on the hotel.

The fact that the items were purchased using the company credit card for business software used only by the business makes it seem to me as though this too is an allowable expense for VAT purposes.

I had a similar problem with a computer that was purchased by company cheque but all documentation had the directors name and address rather than the companies. During the VAT inspection the nice person from HMRC wanted to see the computer, checked it against the invoice and checked the software on it to ensure that it was being used only for business purposes. It was then allowed.

Personally I think that you should put these through as allowable for VAT but have words with the director about how he must take care with such matters in the future and point out that should there be an inspection that there is a chance that these items may be disallowed dependent upon how realistic the inspector is and the materiality of the items in question in the accounts.

Its an unfortunate fact that some inspectors are purists whilst others realise that there needs to be an element of flexibility in business especially where such is the result of a genuine mistake.

Don't do the VAT return until you've also got some feedback from Sheila and possibly Phillip of the back office group as this may turn into a minor debate.

cheers,

Shaun.

Harps · Veteran Member

Thanks for that Shamus. It is really appreciated.

I will wait and see what Sheila and Phillip have to say. It will be interesting see if we do have a debate on this.

Thanks again.

BackOfficeGroup · Guru

My turn then...

I would agree that a person and a Ltd co are 2 different entities and from that can establish that in order for the Ltd co to claim the VAT on a purchase invoice, it would ned to be addressed to the Ltd co.

However, some invoices/receipts do not show the name and address of the purchaser ie print cart from tesco, so as long as the Ltd co use that type of printer, it should be allowed. If an employee ie Director bought something themselves for the Ltd co, they could be reimbursed the cost and the VAT should be allowed. If the company credit card has been used and you can show that the item is wholly used by the Ltd co, I also believe that the VAT should be allowed, even if the name and address is the Directors or whomever is named on the card itslef. If the name and address was not the Directors or an employee, then it should not be allowed.

Clients certainly have a problem with this and need educating, as they just cannot use the Ltd co as if it were their personal bank account!

P

Shamus · Forum Moderator & Expert

Morning Phillip,

glad to have my fellow vulture back online again today. Hope that your not missing sunny Brum too much!

Sounds as though we're in agreement on this thread as well... Give me chance, sure I'll find something controversial to say on one of the other threads!

I've got a client later this morning so I'll be off line for a few hours.

Talk later,

Shaun.

Harps · Veteran Member

Thanks for that. Your help is really appreciated.

I am hoping to re-educate my client. I will keep wittering until he does!!!

Thanks again.

semsley · Guru

Agree that if a Company Credit Card is used then VAT is reclaimable. However, if the director or any other employee buys things for the company using their own personal credit or debit card then VAT is not reclaimable.

Shamus · Forum Moderator & Expert

Shiela,

Sorry, I can't agree with you on this. Refer to mine and Phillips answers above especially with reference to the printer cartridge scenario.

If you use your own credit card and recharge it to the company backed by a VAT receipt then the VAT is reclaimable.

Shaun.

Wella · Expert

Thought I'd stick my tuppence worth in, even though VAT is my nemesis.

Don't the VAT rules say that if the value of goods supplied is less than £250 inc VAT then a simple VAT receipt is acceptable as long as it shows VAT number suppliers name & address, tax point and the item can be identified. That way things can be bought out of petty cash, or individuals own pockets and reclaimed easily.

Any thing over that must be more detailed including showing the name or trading name of the customer (that is a direct quote off the HMRC website). I read that as, if the business is a sole trader or partnership, then it could be in a personal name or trading name but if it is a Ltd, then it would have to be in the business name (as that is the legal entity).

A supplier also only has to issue a VAT invoice/ receipt if they are asked for one. So the emphesis is on the buyer to ask for one.

In a previous life, working for a large Plc, I have had to reclaim expenses and if an invoice wasn't made out to the company (it could show my name in the supplied to box, if there was one) I couldn't claim my money.

Bill

Sorry about the double edit. Having a dyslexic fingers day

-- Edited by Wella on Saturday 30th of January 2010 11:39:25 AM

-- Edited by Wella on Saturday 30th of January 2010 11:42:43 AM

Wella · Expert

Hi Shaun

Just to pick up your comment on the other thread about disagreeing.

Couple of additional points I would like to make.

VAT700 Para 19.7.5 is the only reference I can find that says an invoice can be in an employees name if it is for subsistence expenses or motoring fuel.

I think in your case, you got lucky and the inspector applied common sense to a one off occurrance. If there had been more incorrectly addressed invoices, do you think there would be a point when they wouldn't have been lenient?

Bill

Shamus · Forum Moderator & Expert

Hi Bill,

you're probably right as always!

The subsistence would cover employees paying for hotel expenses on their own credit cards and then recharging.

Printer cartridges are minimal so reimbursement to the exact amount of the invoice on the basis of a non purchaser specific invoice is probably ok... This is really petty cash territory.

The case with the computer was as you say likely to be an instance of an inspector using common sense and could be a one off probably on the basis of the books being squeaky clean on everything else combined with physical evidence that the computer was in use by the business. (Even the serial number of the unit was checked against the documentation).

Got to admit though, this one was an interesting and thought provoking thread.

As always you're a complete star.

cheers,

Shaun.

Wella · Expert

Definately not always right Shaun - particularly on VAT related matters (See my input in SAGE VAT Manual adjustments post).

I like things to be Black & White, when it comes to bookkeeping but on the other hand, grey/ blurred areas raise better discussions and add to the pool of knowledge (sometimes think mines sprung a leak)

Have a good weekend
Bill

semsley · Guru

There's no problem with anybody buying things for the company via Cash and the company claiming the VAT because it is impossible to know who bought it. However, if an employee buys something with his/her own credit or debit card then the VAT on that purchase is not allowable. Believe me, this was brought to my attention at a VAT inspection - through charities where project workers had been buying things on their own cards and the VAT had been reclaimed via their expense claims supported by the bills showing payment by card. We now try to drum it in to them that they either use their own cash or get petty cash first but it's a hard slog and charities need all the money they can get.

HendyPhilhendy · Guru

I am sure a business can claim the vat on expenses paid by and re-imbursed to employees providing a valid vat receipt is provided.

When I was employed I had to provide an expense claim for which had a vat column. What would be the point if they couldn't claim vat. I paid for most things on personal debit or credit card.

Also mileage includes a special vat calculation. Backup receipts are those provided. Don't see that the payment method matters.

HendyPhilhendy · Guru

See below Taken from HMRC input VAT guide http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true&_pageLabel=pageLibrary_InternalGuidance&propertyType=document&columns=1&id=HMCE_PROD1_023496

I've highlighted the main relevant sections. Seems to imply to me that if the expense is purely for business then that is fine and allowable.

7.4 Supplies to employees

You must, however, take care in applying the supply rule when the third party

is an employee of your trader. The following are examples of expenditure

where the supply is prima facie to the employee but are accepted as made to

the employer provided the employer meets the full cost:

road fuel and other motoring expenses;

subsistence costs ie meals and accommodation

necessarily paid for whilst away from the normal

workplace;

removal expenses arising from company relocations or

transfer of staff;

sundry items such as small tools, materials etc purchased

on site.

The above examples are by no means exhaustive - they serve only to

demonstrate typical scenarios which will be met. In all such cases the point to

consider is whether the supply is legitimately financed by the employer for the

purpose of his business. Provided this is clearly established the intention of

the legislation is maintained when input tax is allowed in these circumstances.

This treatment does not apply to business perks; e.g. hotel accommodation or

holidays provided to employees as a reward or motivation. See also

paragraph 8.9.