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Why You Need To Check Your Business' VAT Recovery RateSalem-News.com Business
VAT recovery rates fluctuate according to expense categories and business themselves - you could be claiming more than you think.
(SALEM, Ore.) - VAT (Value Added Tax) is an incredibly tricky subject, incorporating seemingly heaps of rules and regulations, which makes attempting to recover VAT rather off putting.
But - it's important to check your VAT recovery rate as it can fluctuate for various expenses - anywhere from as little as 0% to a huge 27% eligible to claim!
Example: A Business Trip Abroad
Imagine for a moment that you have gone outside of the UK for a conference. Of the expenses you’ll be racking up, you can expect them to include: the cost of the conference ticket, and any other associated events, your hotel and transportation, food, restaurants, phone, internet usage, and maybe some other expenses in certain circumstances.
Each of the expenses mentioned above are classified under different categories (for example, food and restaurants could be classed as ‘subsistence’, while drinks at a bar might be ‘businesses entertainment’, if a client was also there, etc) - and each separate category has a different VAT recovery rate.
Shockingly, most businesses fail to claim the right amount of VAT - figures from as far back as 2005 show that even back then, over €5.5 billion in VAT remained unclaimed by businesses - and only €2.5 billion was. Clearly, not being up to date with the correct recovery rate costs - to the tune of several billion every year.
Why is the VAT Recovery Rate So Low?
This is for several reasons, mostly due to the fact that VAT on travel and expenses can be hard to quantify or prove, as well as being a general headache.
As a result businesses - at a local and national level - struggle to recover everything they might be due. It can also be a byproduct of the way in which companies handle these separate expenses, aside from general accounting, with employees creating their own, self-reported claim forms.
In this respect, some employees may not be as familiar with recovery rate exceptions, or VAT at all, thus leading to miscalculations, important details missed or worse of all - discovering that invoices and receipts aren't even tax compliant as they are issued in the name of the traveller, not the business.
It’s therefore essential for businesses to invest in a professional and effective solution for VAT recovery rate certainty, to make sure they are receiving everything they are due.
VAT Recovery: Complex and Time Consuming - But It’s Certainly Worth It
Yes, there certainly seem to be issues and complications when it comes to recovering tax, but that is surely offset by the large amount of savings and variations in the VAT recovery rate.
Plus, if your business is international, or has another office outside of the UK, the rules for claiming back VAT are even more complicated, with regulations and registration requirements differing across countries.
Ultimately, you can never be certain of how much VAT you’ve claimed to expect back, but as the figures above show, there is certainly enough going unclaimed that you should try to get every last penny you're owed - because it all adds up.
Source: Salem-News.com Special Features Dept.
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