News

December 11, 2009

Firms missing out on a quarter of VAT reclaims for fuel

Small firms are failing to claim back a quarter of the fuel-related VAT they could be, because of poor expense procedures, research has revealed.

The survey by Fuel Genie found that petrol is the most common expense claimed by employees in UK small firms, yet one in four fuel expense claims is submitted without a receipt.

It highlighted that a VAT-registered company with five vehicles could typically reclaim an annual £1,000 for petrol, meaning that they are losing out on at least £250 a year.

Under HM Revenue & Customs rules, VAT-registered firms can reclaim VAT when buying goods or services for their business, including VAT on fuel, as part of their monthly or quarterly VAT return.

The Association of Chartered Certified Accountants' (ACCA) head of taxation, Chas Roy-Chowdhury, said small businesses needed to be "diligent" about keeping invoices and receipts for all expenditure if they were not to miss out on reclaiming VAT.

"For any business expenditure, with the exception of entertainment and alcohol, businesses should be recovering their input tax, or VAT, on those purchases," he said.

"Firms also need to be aware that submitting correct VAT forms either monthly or quarterly is a legal requirement," added Roy-Chowdhury. "While filing receipts away is another burden for small firms trying to keep their heads above water, it is also an essential part of their tax obligations to HMRC. If they're failing to recover their VAT, they're potentially breaking the law."

Fuel Genie spokeswoman, Sarah Keane, added: "Business owners need to clamp down on lax attitudes to expenses or risk losing much needed cash at a time when profits are under extreme pressure. Ensuring corporate expense policies are followed is something that can have a big effect on a company's bottom line."

Stephen Roper, professor of enterprise at Warwick Business School, which carried out the Fuel Genie research, said efficient paperwork was crucial for the smooth running of any business.

"During times of economic difficulty, one of the main reasons why small firms go under is because they run out of cash," he said. "Good cashflow management should be a key priority as it is crucial to success."

• For more information about reclaiming VAT, visit the HRMC website