VAT treatment for 5 of the common costs incurred in business. We are expert Xero accountants in UK.
VAT on bus fares
Bus fares are zero-rated for VAT. Therefore, you can’t reclaim VAT on those. (remember most public transport costs are zero – rated for VAT)
VAT on train tickets
Train tickets are zero-rated for VAT. Therefore, you can’t reclaim VAT on those.
VAT on Taxis (eg UBER)
Most of the times UBER drivers are self employed and, therefore, not VAT registered. They don’t charge VAT. So, you can’t claim.
You can only claim back 20% VAT if the taxi service is VAT registered.
VAT on Entertainment
There is a difference in tax treatment between staff entertainment and business entertainment.
None-staff entertainment (eg clients, potential clients are non allowable expenses). So, no VAT could be claimed on those.
Staff entertainment are allowable (see below)
Parties/Christmas Parties/annual function (these are treated as ‘staff welfare’)
An annual cost of £150 per head is allowed.
This applies to both you and your spouse if you are both directors of your company.
If your spouse is not a director then you can still take them.
You can have more than one event but total annual cost per head must not exceed £150 to claim VAT.
This will then be shown as staff welfare in the accounts and tax deductible as well.
If you need any help to ensure you correctly claim VAT on all expenses, please contact Xero accountants here