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Can You Reclaim VAT on Business Flights and Other Travel Expenses?

Can You Reclaim VAT on Business Flights and Other Travel Expenses?

Businesses frequently incur significant costs when sending employees on business trips, whether for client meetings, conferences, or exploring new markets. These business expenses can quickly add up, including costs for flights, fuel, train tickets, and other travel-related expenditures. Fortunately, businesses, including self-employed individuals, have the opportunity to reclaim VAT on certain travel expenses, easing some of the financial burden. This post outlines the key requirements, exemptions, and necessary steps for recovering VAT on business flights and other related costs.

What business travel expenses can businesses claim VAT back on?

Businesses can reclaim VAT on a range of travel-related expenses, provided these costs are incurred solely for business purposes and proper documentation is maintained. Key expenses that qualify include:

  • Accommodation: hotel stays and other accommodation costs can have their VAT reclaimed if the purpose of the stay is directly related to business activities such as attending conferences, meetings, or other work-related events. 
  • Car hire and fuel costs: VAT on car hire used solely for business purposes is reclaimable. For vehicles used for both business and personal travel, VAT can still be reclaimed on the business portion, provided detailed mileage records are kept or the fuel scale charge is paid. The VAT on fuel costs is also recoverable if the vehicle is used exclusively for business purposes, with all relevant documentation in place.
  • Meals and subsistence: expenses for meals and subsistence during a business trip are eligible for VAT recovery, provided these costs are not covered by a flat-rate per diem allowance. The expenses must be directly linked to business activities, and proper VAT invoices must be maintained.
  • Parking and toll fees: parking fees and tolls incurred during business travel can have their VAT reclaimed, provided these expenses are directly related to the business trip.
  • Conference and event fees: VAT can be reclaimed on fees for attending conferences, training sessions, or other business-related events, as long as these events are directly connected to the business's operations. As with other expenses, VAT invoices must be provided to support the claim.

It is important to note that VAT cannot be reclaimed on expenses that are purely for personal use, entertainment, or hospitality purposes, even if these are incurred during a business trip. Additionally, VAT can only be reclaimed if the supplier is VAT-registered in the UK or EU. Regular internal audits and consulting with VAT experts can help businesses optimise their VAT recovery while remaining compliant with HMRC regulations.

What are the requirements for reclaiming VAT on business travel expenses?

Reclaiming VAT on business trips requires more than simply submitting receipts. There are specific conditions that must be met to comply with HMRC regulations. Here’s what business owners and self-employed people need to consider:

Business purpose: the travel must be solely for business purposes. VAT cannot be reclaimed on personal travel, even if it occurs alongside a business trip. The intent and purpose of the travel should be clearly documented and justifiable as a business expense.

  • Proper documentation: the correct documentation, such as VAT invoices should be issued by the supplier. These invoices must clearly display the VAT amount charged. Receipts alone may not be sufficient unless they include all necessary VAT details. For those reclaiming VAT on fuel costs, keeping detailed mileage records is important, particularly when using company vehicles.
  • VAT registration: your business must be registered for VAT and able to provide a valid VAT registration number when claiming VAT on business flights and other travel expenses.
  • Supplier’s location: the supplier, whether it’s a fuel provider or travel agency, must be VAT-registered in the UK or another EU country. Services booked through non-UK or non-EU suppliers may not qualify for VAT recovery.
  • Input tax deduction: the expenses must qualify as input tax, meaning they are incurred for the purpose of making taxable supplies. If the travel costs relate to exempt or non-business activities, the VAT may not be recoverable.

How to stay compliant when reclaiming VAT on business travel expenses

Maintaining compliance with HMRC regulations is essential to avoid penalties and ensure your VAT claims are accepted. Here are some key steps for businesses and self-employed individuals:

  • Accurate record-keeping: keep detailed and accurate records of all business travel expenses, including fuel costs. Ensure that these records clearly demonstrate the business purpose of the travel. Detailed mileage records are particularly important for reclaiming VAT on fuel costs.
  • Employee training: educate employees responsible for booking travel and managing expenses on the correct procedures for VAT recovery. This ensures that all necessary documentation is gathered and maintained, facilitating the VAT reclaim process.
  • Regular audits: conduct regular internal audits to review travel expenses and VAT claims. This practice helps identify any discrepancies or compliance issues early, allowing for timely corrective action.
  • Consult VAT experts: engaging with VAT consultancy services, like The VAT People, can help ensure that your claims are accurate and in line with current regulations. VAT experts can provide guidance on complex VAT issues, including those related to business flights, fuel costs, and other travel expenses.

Consulting with VAT specialists, such as The VAT People, can provide tailored advice to help your business navigate these requirements effectively. For further assistance, you can reach The VAT People by calling 0330 8284 232 or by filling out the contact form.