I've stuffed up at work

[Saturn1066]

One of my roles at work is to process and pay employee expenses. I have not been claiming VAT back on any expenses for about a year.

I was confused by the rules, what we can claim back and what we can't, in the end, given my workload and the situation we find ourselves in I ended up just posting the gross amount. I should have asked for clarity for what can and can't be claimed.. I've been neglectful and it's entirely my fault.

At guess, I'd say the unclaimed VAT amount would be about 0.5 - 1.5% of our total VAT payments in a year.

I've royally stuffed up, and I think it's a only matter of time before someone questions why no vat element of expense payments has been posted.

What do you think the likely outcome will be once this gets uncovered?

Please don't worry and do not leave your job!

VAT cannot be reclaimed on client entertainment. There are HMRC rules here. The second link is a bit more user friendly.

"HMRC only allow tax relief and the claiming of VAT on the cost of entertaining your business's employees. And they're very strict about who counts as "an employee". Former and previous employees don't qualify, nor do subcontractors, nor do shareholders who don't work in the business."

So you don't have a huge task to do reviewing old claims. Just acquaint yourself with the rules and start applying them to future claims.

I haven't just got these off the Internet - I had a limited company till recently and an accountant and he wouldn't let me claim VAT on client entertainment!

www.gov.uk/guidance/business-entertainment-and-vat-notice-70065

www.freeagent.com/guides/expenses/entertaining/

The mistake is the 'right way' for the company - they have effectively overpaid the vat so there wouldn't be an issue in that respect , and the amounts don't necessarily sound material.
However, I would recommend 'owning up' - finance managers can't check every transaction, if they did then they might as well do the job themselves in the first place.

Can you give hmrc a call and have a solution for when you fess up to the boss? My accountant says no vat on entertaining too.

When I took over book keeping for a company I managed, I uncovered £70,000 of imports that should've been VAT free but weren't processed correctly and the first time I did payroll discovered they'd been processing my childcare vouchers incorrectly. This was a large, prestigious accounting firm that was caught out by a person that had never done accounting before.

Shit happens, own up and ask for help on how to fix it. If you're up front and honest you're much less likely to screw up

I don't know the rules on what can and can't be claimed back, alcohol, who was in attendance, employee only entertainment.

Are you in sole charge of the payroll, OP?

If so what are your qualifications and should you have known this?

If you are the payroll manager then I doubt anyone else understands the rules more than you.

I would do nothing yet, a couple of days makes no difference. Set aside some time to really get to grips with the rules- weekend if necessary.

Now, imagine you have a penis:

When you present the solution to your boss you have not fucked up. You have identified a way for the company to save a lot of money. It didn't happen previously because your predicessor didn't put it into the systems. He's most welcome. Can we set aside some time to discuss pay progression?

Ok. To put this into perspective.
You say the figures are small in the grand scheme of things? So going forward have a plan on how to calculate the VAT that can be claimed back and do it.
Have a best guess on how much you could potentially claim back from HMCE for the missed VAT. Then have a best guess on how long it will take you to go through all the transactions to find the missed VAT.
Is it worth the cost?
For a simple example, you could claim back £ 100, but it would take you 5 hours at £25 per hour. Not worth it for the company, or you.
For what it’s worth, I actually deliberately stopped trying to calculate VAT to be claimed back on expenses (apart from the obvious ones) as the time taken to calculate it cost more than the amount we could re claim.

We don't claim VAT on expenses for this exact reason, it's simply not worth the effort. I'd look in the ledger, look how much was fuel and claim that as a lump sum. I wouldn't bother with anything else.

[quote Choux]Please don't worry and do not leave your job!

VAT cannot be reclaimed on client entertainment. There are HMRC rules here. The second link is a bit more user friendly.

"HMRC only allow tax relief and the claiming of VAT on the cost of entertaining your business's employees. And they're very strict about who counts as "an employee". Former and previous employees don't qualify, nor do subcontractors, nor do shareholders who don't work in the business."

So you don't have a huge task to do reviewing old claims. Just acquaint yourself with the rules and start applying them to future claims.

I haven't just got these off the Internet - I had a limited company till recently and an accountant and he wouldn't let me claim VAT on client entertainment!

www.gov.uk/guidance/business-entertainment-and-vat-notice-70065

www.freeagent.com/guides/expenses/entertaining/[/quote]
This is very interesting. Thank you.

Seems you did the right thing after all

VAT can be recovered on things like hotels and meals for employees who are staying away overnight during the course of business, but you need to check the rules carefully.

The VAT on fuel is a minefield, and depends on a number of factors - you would be best to refer that one to the accountants who compile the statutory accounts. Ask for their instructions on how and what to claim in writing, and follow it to the letter.

If it's any consolation, I found out this week that my predecessor did not pay VAT where she should have been. We now have an unexpected bill that is a couple of percent of our revenue (numbers aren't big, but we are a small organisation fighting for survival, frankly).

I'm grateful that it's not me (it could have been), but I'm fuming that I need to explain this to our board!