Many companies are satisfied with their Travel & Entertainment (T&E) system as it likely offers easy integration with financial systems, simple data pull and the ability to provide an overview of company-wide expense-related activity. While of course, these features are necessary in an efficient T&E system, there is another factor that is often overlooked: proper handling of the VAT.
Every year, companies file incorrect VAT claims, reporting T&E data that is inaccurate or not properly backed by evidence. This puts them at serious risk for audits and non-compliance with domestic and international regulations. Valid claims may also be rejected due to incorrect filing, leaving significant sums of VAT unrecovered.
Incorrect VAT claims can be the result of many factors, including:
Improper system configuration: It is not uncommon for companies to discover that the initial system setup was not configured properly. Some issues that cause improper handling of VAT include erroneous configuration of VAT rates, lack of consideration for various jurisdictions and their varying use of expense categories, expense categories with unclear nomenclature, and proper updates to VAT rules, which often require VAT-specific experts and procedures.
Faulty invoice data: Employee invoice submissions often contain missing or incorrect data. If there are multiple receipts submitted in bulk, missing invoice details such as supplier ID, duplicate submissions or lack of a proper invoice altogether, the (valid) VAT claim will be rejected. There are also instances where employee submissions will be acceptable for expense claims, but not for VAT claim, such as using credit card slips or booking confirmation emails instead of proper invoices.
VAT calculation errors: T&E systems are programmed to make assumptions that may cause erroneous calculation of recoverable/deductible VAT. For example, accommodation expenses automatically assume VAT is included, while that may not actually be the case.
Special VAT rules: Certain expense categories have very specific VAT rules that may vary from location to location. These include Meals, Entertainment, Fuel & Mileage, and Gifts. For example, in the UK, VAT can be recovered only for meals that do not include third-party attendees, and this must be specified by the employees in the submitted documentation.
Currency inconsistencies: Inconsistent usage of currencies can easily lead to processing errors. These errors are often not detected until they are uncovered during an audit.
To maximize eligible VAT refunds and reduce audit risk, many companies choose to implement VATBox, an automated, enterprise-wide, cloud-based VAT recovery solution that streamlines the global VAT recovery process. By avoiding the practice of feeding T&E data directly into financial systems, and instead applying VATBox’s specific VAT-reclaim capabilities in between, a number of clear benefits will be achieved. VATBox verifies that expenses are indeed justified by checking the availability and suitability of evidence, validates the reported expense against the evidence to prevent fraud and misclassification, and provides a full breakdown of expenses to items, including association to VAT rates.
VATBox has successfully streamlined the global VAT recovery process, providing businesses with unrivaled visibility, compliance, and data integrity, and ultimately boosting its bottom line. Let us show you how your company can maximize VAT on it T&E expenses. Request a free demo here.