It is all too easy to enter an expense claim or bill, or enter a direct payment into the accounts for a hotel expense, and incorrectly claim 20% VAT. This is particularly relevant at this time of year as bills start to come in from Christmas parties (or business meetings!).
In accounting software, there is often a “default” setting for the VAT rate on an expense account, and every transaction posted to that expense account will have VAT at 20% extracted. So, enter a hotel bill for £120 and £20 VAT will be claimed, and £100 will be the expense. However, the current rate of VAT on hotel accommodation is 12.5% (it was only 5% from 15 July 2020 – 30 September 2021). The VAT claimable on the £120 is therefore only £13.33 at 12.5%.
Please ensure you are using the correct VAT rates and override the default 20% as necessary. Check the VAT being claimed agrees to the amount of VAT shown on the supplier invoice.
On a similar note, the “Motor expenses” code may also have a default of 20% – so care is needed when entering insurances, MOTs, road tax etc. none of which actually contain VAT.
Contact us if you need any assistance in running reports to check the VAT position or review entries to ensure they are correct.
