VAT Codes

[MelissaJane]

Hi
This may be a simple question but i'm very new to VAT so i'm sorry!
If an employee gives in an expense form for a tool/part to help him with his job, but there's no VAT on the receipt or he hasn't got a receipt at all, should i record this expense as zero rated or exempt?
Thank you.

[Trevor S]

Hi - technically, it's neither! Exempt and zero rate are two categories which apply to various types of goods/services supplied, set out in VAT law. Whereas here, the tools/parts they've bought are probably standard rated (assuming the supplier is VAT registered). The issue you have is that you don't have any documents that would support you recovering any VAT which might have been charged.

Assuming its not possible to get a valid VAT invoice ... does your system have any other "no VAT" codes (e.g. outside the scope)? If not and you have to pick one of those two, then zero rated is probably the better. This is on the basis that the purchase probably relates to the company's taxable business activities, but there's no VAT value to account for.

[MelissaJane]

Hi Trevor
Ah, OK that makes perfect sense. Yes you're right, the parts/tools are normally standard rate but the employees continually forget to get receipts, or what they do provide hasn't got VAT on at all.
I've checked our system and there is a 'No VAT' option, so I'll use that one in future.
Thanks again!