Have you ever asked yourself if you can claim VAT on business entertaining? 

The answer isn’t always straightforward! HMRC’s VAT rules treat staff entertainment and client entertainment very differently. Some expenses—like team-building events for employees—qualify for VAT recovery, while wining and dining clients usually doesn’t.  

Let’s break down the key differences between staff and business entertainment expenses and clear up which types of expenses you can and can’t claim VAT on. 

What’s the difference between staff and business entertainment expenses? 

The key difference comes down to who you’re entertaining and why. 

Staff entertainment is all about your employees. Think team-building days, Christmas parties, or a summer BBQ to reward hard work. The goal? Boost morale, encourage teamwork, and make your employees feel valued. 

Business entertainment on the other hand, is focused on clients, prospects, or suppliers. This includes things like taking a potential client out for dinner, treating them to a sports event, or organising a fancy networking drinks reception. The aim here is to strengthen relationships and potentially win more business. 

Can you claim VAT on business entertaining?

In most cases no. You can’t reclaim VAT on business entertainment expenses like client dinners, tickets to events, or free hotel stays. HMRC sees these as perks rather than costs that are wholly and exclusively for business purposes—so they don’t qualify for VAT recovery. 

That said, there are some exceptions. For instance, if you’re hosting an overseas client and providing reasonable hospitality—like tea, coffee, and sandwiches during a business meeting—you can reclaim the VAT. The key is that the hospitality must be for an overseas client, it must be directly linked to business discussions, and it mustn’t be excessive. 

Think of it this way, if you take an overseas client to a Michelin-starred restaurant with an à la carte menu, HMRC would likely see it as entertainment rather than a business necessity—so no VAT recovery. But if you provide a simple working lunch in the office, that’s more acceptable. 

Can you claim VAT on staff entertainment? 

Yes, you can claim VAT on staff entertainment—but only if certain conditions are met. 

Think of it like this, if you throw a Christmas party for all your employees to thank them for their hard work, you can reclaim the VAT on the cost of the event. That’s because the entertainment is for a business purpose (staff morale and appreciation), and it’s available to all employees—not just the directors or business owners. 

However, if a company director takes a few clients and a couple of senior managers out for a fancy dinner in London, that wouldn’t qualify. Even though some employees are there, they’re acting as hosts to non-employees, which means the VAT on that meal isn’t recoverable. 

Can you claim VAT on client entertainment? 

No, you generally can’t claim VAT on client entertainment. 

Let’s say you take a potential client out for dinner to impress them and hopefully win some business. Even though this is a common part of doing business, HMRC sees it as an unnecessary expense rather than a business essential—so you can’t reclaim the VAT on that meal. 

However, there are some grey areas. For example, if your company sponsors a big industry conference where clients are entertained, but you also get significant brand exposure, you might be able to reclaim some VAT.  

What details do you need to claim VAT on business entertaining? 

By now you know that the only type of business entertainment where VAT can be reclaimed is staff entertainment. 

To claim VAT on staff entertainment, it’s important to keep accurate records—this way, if HMRC ever has any questions, you’ll be able to show that the expenses meet the necessary criteria. 

Let’s say you throw a team-building day for your employees at a go-karting track. To reclaim the  

VAT, you’d need: 

1. VAT receipts: the venue should provide a proper VAT invoice showing the total cost and VAT amount. 
2. Proof it was for your employees: a guest list or internal invite showing it was a staff-only event (and not just for directors). 
3. Business purpose: something to show that the event was for team building, not just a fun day out.  

It’s also a good idea to digitise your receipts and keep them on file for at least four years—just in case HMRC wants to check your VAT return later.  

Keep track of all your business, staff and client entertainment expenses

With Capture Expense, you can effortlessly track, digitise, and apply the correct VAT rates to all your business, staff, and client entertainment expenses.  

Stay HMRC-compliant, save time, and never miss a reclaim opportunity. Book a personalised demo today and see how easy expense management can be! 

Managing expenses across multiple countries is complicated. Most systems aren’t built to handle the differences between regions, relying on rigid rules that need constant updates and failing to properly support multiple languages.  

AI is changing that. At Capture Expense, we’ve explored how generative AI can take on some of the biggest challenges in global expense management; and we’ve built features that remove unnecessary steps and make it easier for teams to submit expenses. But AI still has its limits—especially when it comes to compliance, and even more so for compliance across multiple countries. 

So, we’re going to look at what all that means, and explain in the simplest terms where AI can and can’t help your global expense management. 

Why businesses struggle managing expense compliance and localisation

There’s no doubt that managing expenses across multiple countries is hard work; global businesses have to face different tax rules, per diem rates, and reimbursement policies (to name a few) across countries. And without the right systems in place, it’s extremely difficult to keep up—risking errors, delays, and non-compliance. Here’s why expense management systems typically struggle: 

Hard-coded rules 

Expense management systems typically rely on hard-coded rules, meaning they have to be manually updated every time regulations change. This is inflexible and difficult to maintain, which is why a lot of SaaS providers struggle to support multiregional teams in such heavily-regulated areas of a business. 

Language translations 

Then there’s language barriers, which usually rely on basic translations that happen directly in the systems interface. This means they might struggle to truly adapt to different languages, leaving employees struggling to properly understand the expenses process. 

How AI solves the multi-language problem

As we mentioned, many systems rely on translations directly in the interface, which also means that users rely on the provider to make each individual language available. That can leave employees struggling to submit their expenses correctly if the app doesn’t support a language they’re fluent in—ultimately leading to more unnecessary barriers in the expenses process. 

But when we use AI as the core method of raising expenses, things change. We’re building a process that allows your teams to raise expenses in the apps they already use every day, without having to go into an expenses system. Here’s how that works: 

1. Integrating with everyday messaging apps: We’re plugged into apps like WhatsApp, Teams, and Slack, so your teams can submit their receipts and raise expenses via a quick text and never have to open Capture Expense. 
2. Embedding conversational AI: The bridge between messaging apps and Capture Expense is conversational AI (like ChatGPT) so your users can use natural language to raise their expenses and access instant support for any of their questions. 
3. Automatic translations: No matter what language your users speak in to submit their expenses and ask questions, the AI will reply in that language. If an employee submits an expense in French, for example, the AI understands the input and responds in French. 
4. No manual programming: It adapts instantly to whoever is speaking to it, without having to build individual languages into the interface. They’re already there and ready to use, giving way more flexibility and accessibility. 
5. Natural interactions: Because of the nature of conversational AI, users can interact in normal text-messaging style. There’s no need for structured responses or form submissions—just speaking like they usually would in a message. 

AI’s limitations in global expense compliance

While AI excels at user interaction and real-time translations, there’s still a lot of complexity involved for global regulatory compliance. It may be able to interpret tax rules, categorise expenses, and flag potential compliance issues, but global tax laws are extremely complex and changing frequently, and so human judgement will still play a large role. Here’s how it can and can’t help: 

Why AI can’t automate global expense compliance 

Ultimately, the compliance rules (like VAT rates, per diem, reimbursement policies) would need to be manually set at the platform level for the AI to then recognise whether expenses are compliant. 

That’s because AI isn’t inherently aware of regional tax laws and needs pre-defined guidelines to work effectively. Simply put, AI can only apply the rules—it can’t create them. 

How AI can support global expense compliance 

Once the correct rules are in place, AI can automate compliance moving forward (but ongoing human oversight will still be needed). It can interpret the policies in place (both global compliance legislation and your own company policies) so it can identify things like the correct VAT or GST rate depending on the location of the expense, or automatically assign an accounting category to expenses based on data automatically pulled from receipts. 

While there’s still some manual setup at the start, AI makes it far easier to stay on top of compliance once those rules are in place. Finance teams can start to rely on AI to catch issues early, reduce errors, and speed up approvals—instead of checking every expense manually. 

Overcoming international spend challenges with Capture Expense

AI can’t handle global compliance on its own, but it can certainly make things a lot easier. 

At Capture Expense, we’re committed to implementing AI at every stage of the process it can help. We’re constantly releasing new features, with our latest AI functionality including: 

• Everyday messaging apps: so your teams can submit expenses and access support through apps like Teams, Slack, and WhatsApp with a quick text. 
• Finance Copilot: so you can pull every and any insight you need in seconds, by simply telling your copilot what you need to know. 
• Category matching: so you can automatically apply categories and VAT to expenses without manual intervention. 
• Currency conversions: so no matter where your teams are spending money, it’ll be automatically converted and reimbursed in their base currency. 
• SmartAudit: so you can automate approval workflows by training AI to make real decisions based on your rules and policies. 

We know there’s a better way to manage global expenses, so we’re committed to building it. Get in touch to find out more about what we’re doing, and how it can work for you. 

As you’ll know, most businesses use software to manage expenses—SaaS platforms allowed us to move away from spreadsheets and paper to keep on top of reporting, compliance filing, and reimbursements.  

But software hasn’t solved all problems with the expense management process. There are still a number of challenges that even the biggest platforms haven’t solved, despite the tools being there to do so. 

And that’s likely because those tools don’t really change the typical processes, but simply add more steps and tools for people to use—causing more frustration than they solve. 

Now, thanks to the rise of generative AI, at Capture Expense we’re finding better ways to manage expenses and the finance workflows behind it every day. 

So, with that in mind, we’re going to walk through the problems with traditional expense management software and the challenges it’s yet to solve, along with the AI functionality we’ve developed to put a stop to those poor processes for good. 

The problem with traditional expenses software 

Too many apps and too many steps 

Most expense management tools require employees to install an app and learn how to use it. Since they don’t access these tools daily, they often struggle to complete actions because adoption just simply isn’t high enough.  

Expense reporting should be a quick and easy process, but instead, employees find themselves resetting passwords, manually entering data, and completing what they often think is unnecessary admin work. 

A disconnect in processes 

It’s likely businesses are also using multiple tools for different admin tasks across their expense management—like credit cards, invoices, and finance systems, with poor integration between them. The fragmented approach slows things down and increases errors as finance teams jump from system to system to complete tasks. Instead of reducing admin work as they should, the mix of systems are often adding to it. 

The wrong solutions 

And usually, people think the answer to this is more systems—more platforms to integrate, more things to make their process efficient. But all that’s doing is making workflows more cumbersome and adding more interfaces that aren’t intuitive enough to solve the real problem. 

Poor engagement 

And ultimately, our previous points lead us to here—little engagement with submitting expenses. People often delay raising their expenses until the last minute, ‘saving’ their receipts to submit everything in bulk. But in the meantime, that leads to receipts going missing, increased resistance to compliance, delayed reimbursements: and so the cycle continues every month. 

The user experience problem

We believe this is all down to one common thread—user experience. The expense process isn’t particularly enjoyable for anyone involved, whether it be finance teams, managers, or employees, and we think that’s because of: 

1. Inconvenience: users don’t see the process as a value-add. They’re expected to log into a separate system, enter their data, attach receipts, review and approve expenses, and complete multiple steps—so they procrastinate. 
2. Admin: submitting expenses isn’t part of a person’s main responsibilities, and it’s seen as just admin work that takes up time and resource. Especially when it’s with corporate cards, where there’s no urgency for a person to get their own money back. 
3. Outdated habits: there’s a large portion of spenders that save their receipts until they find the time to process everything in bulk because they don’t find it easy enough to submit at the point of transaction, adding extra friction and time to the process. 

So that leaves us wondering how we remove the barriers that the process has historically built, and improve the way everyone interacts with the expense management process. To do that, we have a few questions to answer: How do we remove unnecessary steps, make the most of new technology, and ultimately get people engaged with the process? 

A new approach: expense reporting in everyday apps 

With all of the above in mind, at Capture Expense we thought “what if expenses could be raised inside the tools that employees already use every day?”.  

By integrating with platforms like Microsoft Teams, WhatsApp, and Slack, expense submissions can happen in a way that every person is comfortable with—a quick text message, thanks to conversational AI. 

Removing the friction of standalone apps 

As we’ve mentioned, one of the biggest barriers in expenses is the need to install and learn a new system. Employees are historically reluctant to use these tools, leading to delays and disengagement. 

But by giving users the ability to submit expenses in apps they’re already comfortable with using in their day-to-day routines, that problem disappears. 

Removing the learning curve 

Whether users snap a photo in WhatsApp, send a message in Teams, or drop a receipt onto Slack, they simply have to open their app of choice and tell it what expense they need raising for the system to automatically process, without ever having to open the Capture Expense app. There’s no learning curve, because these tools are already second nature. 

Removing structured form entries 

Conversational AI removes the need for your teams to submit structured form entries to raise an expense—one of the biggest blockers in the process. Again, it’s one of these tasks seen as an admin burden, rather than essential, so we’re building a new approach that means finance still get their structured data, but users don’t have to submit it themselves. 

How does it work?

We’re using the conversational AI we’re all growing more familiar with—think tools like ChatGPT, Gemini, Claude—to link everyday messaging apps with Capture Expense. 

People can submit their expenses using photos or natural language via text message, talking just like they would in an everyday conversation. The AI processes the information instantly and syncs it with Capture expense, allowing them to raise all types of expenses and ask for more information without having to install and set up and additional expenses app. 

Here’s a quick overview of what you can do with the functionality: 

1. Send photos of receipts: to automatically extract the data and raise an expense for reimbursement. 
2. Create manual claims: for things such as mileage, by sending a message like “I drove from home to NE6 2HL yesterday, raise my mileage”. 
3. Access instant support: for help or guidance on the process by asking questions like “what am I still due to be reimbursed?”. 
4. Reduce back and forth for finance teams: by allowing AI to prompt your users when there’s data missing or tasks outstanding. 
5. Block out of policy spend: as the chat immediately lets your teams know if they’re trying to raise an expense that’s out of policy. 

Anywhere, anytime, any app 

Those of you familiar with SaaS will be familiar with the old ‘anywhere, anytime’ descriptor widely used to communicate the benefits of cloud software. But AI takes that one step further, making it ‘anywhere, anytime, any app’. 

AI is moving at incredible speed, and we’re committed to bringing the latest technology to Capture Expense as fast as we can. We’re proud to be the first to bring conversational AI to your users, and it’s not the only thing we’re working on. 

We also have your Finance Copilot for custom reporting in a manner of seconds, and SmartAudit to automate approval workflows by training AI to make real decisions based on your own rules and policies. 

We know there’s a better way to manage expenses, so we’re committed to building it. Get in touch to find out more about what we’re doing, and how it can work for you. 

When it comes to claiming VAT on travel expenses, the key is knowing what’s eligible and what’s not. While you can reclaim VAT on things like hotel stays, car hire, and fuel for company vehicles, other costs—such as flights and train tickets—are zero-rated, meaning there’s no VAT to reclaim.  

You probably have lots of questions around what you can and can’t claim. Luckily for you, we have all the answers. 

What is VAT on travel expenses? 

VAT on travel expenses refers to the Value Added Tax (VAT) that’s applied to costs incurred during business-related travel. This can include expenses like transportation, accommodation, meals, and other travel-related services.  

For businesses, VAT on travel expenses can often be reclaimed if the travel is for work purposes, provided the expenses are appropriately documented and fall within VAT guidelines.  

However, VAT rules can vary depending on the country or region, and some travel expenses may be exempt or have different VAT rates. 

What business travel expenses can you claim VAT on? 

When you’re travelling for business in the UK, you can usually reclaim VAT on certain expenses, as long as they’re for work purposes and you have valid VAT receipts.  

Here’s a list of the business travel expenses can you claim VAT on:  

1. Transport costs:

• Car hire 
• Fuel for company vehicles 
• Taxis and other on-demand transportation services
• Public transport (trains, buses, flights)

2. Accommodation:

• Hotel stays 
• Bed and breakfast (B&B)
• Serviced apartments 

3. Meals and drinks:

• Meals and drinks (breakfast, lunch and dinner) 
• Hotel meals
• Working lunches/dinners  

4. Extras and incidentals:

• Parking fees 
• Motorway tolls 
• Wi-Fi and Internet charges
• Business-related subscriptions 

5. Other business travel expenses:

• Business gifts (provided they comply with HMRC gift-giving guidelines) 
• Conference and seminar fees 
• Business equipment and supplies (laptops or office materials purchased for use during business travel) 

And when it comes to employee vs. client travel 

Employee travel: let’s say an employee travels to a conference on behalf of the business. The company books the employee’s flights and hotel accommodation and incurs VAT on these expenses. As this travel is for business purposes, the company can reclaim the VAT on the flights, hotel stays, and any other associated expenses. 

Client travel: now, suppose the same company arranges travel for a client to attend the same conference. The company books and pays for the client’s flights and accommodation and then reimburses the client for these costs. Here, VAT on these travel expenses isn’t recoverable (unless the expense is part of a business transaction that directly relates to the company’s taxable services). 

Can you claim VAT on train travel?

No, you can’t claim VAT back on train tickets. That’s because train fares in the UK are zero-rated for VAT, meaning no VAT is charged in the first place—so there’s nothing to reclaim. 

Think of it this way, imagine you’re travelling from London to Manchester for a business meeting, and you book an advance train ticket for £80. When you check the receipt, you’ll see no VAT has been added. Since VAT wasn’t charged, you can’t claim it back. 

Can you claim VAT on air travel?

No. Just like train tickets, flights are zero-rated, which means no VAT is charged to begin with. 

Let’s say you book a return flight from London to Edinburgh for a business trip, and the ticket costs £150. When you check the receipt, you won’t see any VAT added. 

Before attempting to reclaim VAT on any expense, always check your receipts. If there’s no VAT listed, there’s nothing to claim! 

Can you claim VAT on mileage?

Yes, you can claim VAT on mileage expenses but only on the fuel portion of the mileage allowance—not on the part covering ‘wear and tear’. 

Say you’re a VAT-registered business, and you reimburse an employee for driving 100 miles in their own car for work. You pay them 45p per mile, (which is the standard HMRC mileage rate for 2024/25). However, you can’t reclaim VAT on the full 45p—only on the fuel element. 

To work this out, you’ll need HMRC’s advisory fuel rates, which are updated every quarter. If the fuel portion is, say, 14p per mile, you can reclaim VAT on that part, not the full 45p. 

So, before making a claim, check the latest advisory fuel rates and make sure you keep accurate records, including mileage logs and fuel receipts. 

Can you claim VAT on foreign travel expenses?

Yes, you can reclaim VAT on foreign travel expenses—but only on certain costs, and the process is different from claiming UK VAT. 

Imagine you’re on a business trip to Germany. You stay in a hotel, rent a car, and take clients out for dinner. The hotel and car hire include German VAT (Mehrwertsteuer), and in most cases, you can apply for a refund on these expenses. However, the restaurant bill isn’t reclaimable, as Germany doesn’t allow VAT refunds on meals. 

You can’t reclaim this foreign VAT through your usual UK VAT return. Instead, you’ll need to apply for a refund through the EU VAT refund scheme (if the country is in the EU) or a similar process for non-EU countries. The rules vary, so it’s important to check what’s eligible in each country. 

Are you struggling to claim VAT on travel expenses?  

Capture Expense takes the guesswork out of VAT claims by automatically applying the correct rates and making sure your records are 100% HMRC-compliant. Book a personalised demo today and see how easy it is to increase your VAT claim success by 34% 

Did you know that business travel in the UK hit a record £68 billion in 2024? Running a business means keeping a close eye on every opportunity to increase sales and manage company spend wisely. One area where you could see substantial savings is by claiming VAT on mileage.  

Many business owners are unaware that VAT can be reclaimed on business-related travel, but with the right guidance, you can make the most of this opportunity. 

Let’s look at who can claim VAT on mileage expenses and how to make a claim.   

Who can claim VAT on mileage?

Think of claiming VAT on mileage like getting a refund on part of your fuel costs—but only if you follow the rules. 

Here they are:

Your company must be VAT–registered 

Being VAT-registered means you charge VAT on your sales and can reclaim VAT on your business expenses. 

If your business isn’t VAT-registered, you can’t reclaim VAT on anything, including mileage.  

It must be for business use only 

Your trip has to be 100% work-related.

If you’re: 

• Driving to meet a client? That counts.  
• Going to a networking event? Absolutely.   
• Taking a detour to grab a coffee with a friend on your way home? Nope, that part doesn’t count! 

Let’s break it down with a real-world scenario

Imagine you run a small IT consulting business, and you’re VAT-registered.  

You often drive to meet up with clients, attend tech conferences, and visit suppliers for new equipment. Since all these trips are for business purposes, you can claim VAT on the mileage. 

Now, let’s say you also use the same car for personal trips—like going on holiday or picking up groceries. That mileage can’t be included in your VAT claim because it’s not business-related. 

What do you need to make a successful claim? 

First and foremost, you need to keep accurate records. So, every time you drive for work, you should keep track of:

• The date. 
• Where you started and where you went. 
• The reason for the trip. 
• How many miles you covered. 

You also need fuel receipts that show VAT details—a credit card statement alone won’t cut it.  

Your step-by-step guide to claiming VAT on mileage

Let’s imagine Sarah runs a small consulting business and frequently travels to meet clients. She wants to claim VAT on her mileage expenses.  

Here’s how she does it: 

Step 1. Gather fuel receipts 

Sarah makes sure to keep all her fuel receipts whenever she fills up her car. Since VAT can only be reclaimed on fuel for business use, having VAT invoices from petrol stations is essential. 

She stores them in a folder and uploads digital copies to her expense management platform to stay organised. 

Step 2. Track business mileage 

Sarah keeps a detailed mileage log. For every business trip, she records: 

• The date of the journey. 
• The journey details (i.e., from her office in Manchester to a client’s premises in Liverpool). 
• The purpose of the journey (i.e., client meeting). 
• The distance travelled (80 miles round trip). 

She uses Capture Expense’s AI-powered matching tool to accurately categorise her expenses, making sure she only claims VAT on business mileage.  

By maintaining an accurate mileage log, she can provide evidence for all her business-related journeys if HMRC ever needs verification. 

Step 3. Apply the correct advisory fuel rate 

Sarah drives a petrol car with a 1.6-litre engine. Checking HMRC’s advisory fuel rates for 2025, she finds that the applicable rate is 15p per mile. 

Step 4. Calculate the fuel cost for business use

She multiplies her business miles (see Step 2) by the advisory fuel rate: 

80 miles × £0.15 = £12.00 (fuel cost for this trip). 

If Sarah completes multiple business trips in a month, she repeats this calculation for each journey and then adds the totals together.  

Step 5. Work out how much VAT to reclaim 

VAT is included within the fuel cost, so to extract the reclaimable amount, Sarah divides by 6 (since VAT at 20% means 1/6 of the total price is VAT): 

£12.00 ÷ 6 = £2.00 reclaimable VAT for this trip.

If Sarah drives 1,500 business miles in a month, her VAT calculation would be:

1,500 miles × £0.15 = £225 (total fuel cost).

£225 ÷ 6 = £37.50 reclaimable VAT. 

At the end of the quarter, Sarah includes her VAT mileage claim in her VAT return.  

Are you looking for an accurate business mileage tracker? 

If you need help claiming VAT on mileage or with any other aspect of your travel expenses, book a demo today to see how we can help.  

Filing your VAT return can be a complex process—especially if you’re new to VAT or unsure about the VAT return deadlines.  

To make things simple, we’ll walk you through what a VAT return is, the VAT return deadlines, and a step-by-step guide on how to do a VAT return. 

What’s a VAT return?

A VAT return is a document that businesses submit to HM Revenue and Customs (HMRC) to report the value-added tax (VAT) they have charged on sales (output tax) and the VAT they have paid on business purchases (input tax).  

It typically covers a specific accounting period, either quarterly or annually, and allows the business to calculate how much VAT it owes or can reclaim.  

Businesses must file VAT returns even if no VAT is due, and they must do so on time to avoid penalties or interest charges. 

What to include in your VAT return

When you file your VAT return, you’ll need to include:

• Your total sales and purchases. 
• The amount of VAT you owe. 
• The amount of VAT you can reclaim. 
• The amount of VAT you’re owed from HMRC (if you’re reclaiming VAT on business expenses) 

What are the VAT return deadlines?

Here are the quarterly VAT return deadlines for 2025: 

Under the Making Tax Digital (MTD) regulations set by HMRC, all VAT returns must be filed digitally using MTD-compatible software. 

What are the penalties for late VAT submissions and payments?

Penalties for submitting your VAT return late 

If you submit your VAT return late, HMRC has a penalty system based on points. Each time you’re late, you get a penalty point. But a single point alone won’t lead to an immediate fine. 

However, once you hit a certain number of points—called the penalty threshold—you’ll get a fine of £200. After that, every additional late submission will cost you another £200. 

The number of points you’re allowed before getting fined depends on how often you file your VAT return.

Here’s the penalty point threshold for your accounting period:

• Annual submissions → 2 points 
• Quarterly submissions → 4 points 
• Monthly submissions → 5 points 

Penalties for late VAT payments 

If you miss a VAT payment, HMRC has a separate penalty system that works on percentages rather than fixed fines. The longer you take to pay, the more it costs you.

Here’s how it works: 

• 0-15 days late: no penalty at all if you pay or arrange a payment plan within this time. 
• 16-30 days late: you’ll get a 2% penalty based on what you owed on day 15. 
• 31 days late: you’ll be charged:
  – 2% on what you owed on day 15.
  – Another 2% on what you still owe by day 30.

 So, if you haven’t cleared your balance by this point, you’re already at a 4% penalty.

• Beyond 31 days: from day 31 onwards, you’ll be charged an extra 4% per year, calculated daily, until you pay off the full amount. 

How to do a VAT return

Here’s a step-by-step guide on how to do a VAT return: 

Step 1. Know your VAT scheme 

Before you start, it’s important to know which VAT scheme your business falls under. HMRC offers different schemes depending on your turnover and how you prefer to manage your VAT: 

• Standard VAT scheme: you submit a VAT return every quarter, reporting VAT on sales and purchases. 
• Flat rate scheme: designed for small businesses, this lets you pay a fixed percentage of your turnover as VAT instead of working out individual transactions. 
• Annual accounting scheme: you file just one return a year but make advance VAT payments throughout. 

Step 2. Get your documents ready

To avoid last-minute scrambling, make sure you have all the documentation you need: 

• Sales invoices (to calculate VAT collected from customers). 
• Purchase invoices (to work out the VAT you can reclaim). 
• Receipts for business expenses. 
• Records of zero-rated or VAT-exempt sales (if applicable). 

Step 3. Work out how much VAT you owe or can reclaim 

Now, it’s time to crunch the numbers. You’ll need to calculate: 

• VAT on sales (output VAT): the total VAT you’ve charged customers. 
• VAT on purchases (input VAT): the VAT you’ve paid on business-related expenses. 

If your output VAT is higher than your input VAT, you’ll need to pay the difference to HMRC. However, if your input VAT is greater than your output VAT, you can claim a refund for the excess amount. 

Step 4. Use Making Tax Digital software 

Since April 2022, all VAT-registered businesses, regardless of turnover, must submit returns using MTD-compliant software.  

Here are some popular MTD-compatible software: 

• Sage 
• Xero 
• Capium 
• QuickBooks 

Make sure the software you choose integrates well with your existing records and gives you a clear breakdown of your VAT return before submission. 

Step 5. Submit your VAT return 

Once you’ve checked everything, it’s time to file your VAT return.  

Here’s how: 

1️. Log in to your HMRC-approved MTD software.
2️. Link it to your HMRC account (if you haven’t already).
3️. Go to the VAT returns section.
4️. Enter your figures (manually or let your software pull them through).
5️. Review everything carefully (remember mistakes can lead to penalties).
6️. Submit your VAT return and save the confirmation for your records. 

Step 6. Pay your VAT or get a refund 

Once your VAT return is submitted, you’ll either need to pay HMRC or wait for a refund. 

• To pay: you can use a direct debit, bank transfer, or debit/credit card. Make sure you pay by the deadline to avoid penalties. 
• To claim a refund: if you’ve paid more VAT than you owe, HMRC will typically process refunds within 10 working days (as long as there are no issues). 

34% increase in VAT claim success with Capture Expense 

Capture Expense helps you stay on top of VAT return deadlines by providing auditable reports that give you a clear record of all your transactions—including VAT returns. Book a demo today to see how it works. 

Worried about getting your VAT payments wrong? You’re not alone. But with the right information, it’s easier than you might think. 

Let’s break down the UK VAT rates, the VAT threshold, and how to calculate exactly what you owe HMRC. 

What are the VAT rates in the UK? 

Here are the current VAT rates in the UK for 2024/2025: 

What goods and services fall under the standard UK VAT rate?

Here’s a list of goods and services that fall under the standard UK VAT rate. For a more comprehensive list, including items that are exempt or outside the scope of VAT, you can visit HMRC. 

What’s the VAT threshold?

The VAT threshold refers to the minimum level of annual turnover a business must reach before it’s required to register for VAT.  

If a business’s taxable turnover exceeds this threshold, it must charge VAT on its sales and may also reclaim VAT on its purchases. 

What’s the VAT threshold for 2025? 

The VAT threshold in the UK for 2025 is £90,000. This has increased from £85,000 in April 2024.

Is the VAT threshold reviewed every year?

Yes, the VAT threshold is reviewed annually in the UK. In the past, it typically increased each year, but there was a notable pause from 2017 to 2024 when it stayed the same.

Here’s how the VAT threshold has changed from 2014 to 2025: 

How to calculate how much VAT you owe

Let’s imagine you’re the proud owner of Glow & Co, a VAT-registered business that sells handmade candles in the UK.  

You’ve had a great month, and now it’s time to figure out how much VAT you owe HMRC. 

Step 1: work out your VAT on sales (output VAT)

This is the VAT you’ve collected from customers.  

Let’s say your total sales for the month were £10,000, and you charge the standard VAT rate of 20%. 

VAT collected = £10,000 × 20% = £2,000 

Step 2: work out your VAT on purchases (input VAT)

You can reclaim VAT on your business expenses.  

This month, you bought wax, wicks, jars, and packaging materials for £2,500, and the VAT included in those costs was 20%. 

VAT paid = £2,500 × 20% = £500 

Step 3: calculate the VAT you owe

To find out how much you need to pay HMRC, subtract your input VAT from your output VAT:

£2,000 (VAT collected) – £500 (VAT paid) = £1,500

This means you owe £1,500 in VAT to HMRC for the month. 

What if you paid more VAT than you collected? 

Let’s say in a quieter month you only made £3,000 in sales (£600 VAT collected) but had £4,000 in business expenses (£800 VAT paid).

£600 (VAT collected) – £800 (VAT paid) = -£200

In this case, HMRC would owe you £200, which you can reclaim as a VAT refund. 

Simplify and automate your business expenses with Capture Expense 

Our sophisticated app automatically applies the correct VAT rate, keeping your records accurate and fully compliant with HMRC—so you never have to worry about miscalculations. Book a personalised demo today to see Capture Expense in action. 

Getting your head around the nuances of travel expenses in Ireland can be tricky. It’s like trying to find your way through Dublin for the first time without Google Maps—confusing, frustrating, and if you’re not careful, it could end up costing you more than it should. 

But don’t worry, if you’re an employer in Ireland looking to reimburse your team for work-related travel, you’re in good hands. 

We’ll outline what qualifies as a travel expense in Ireland, when you can reimburse your employees, and how to report it to Revenue. 

What’s a travel expense in Ireland?

Travel expenses in Ireland refer to the costs incurred by an individual or business for work-related travel. These expenses can include:

• Transport costs (e.g., fuel, mileage for personal vehicle use, public transport fares, taxis, flights) 
• Accommodation (e.g., hotel stays for business trips) 
• Subsistence (e.g., meals and incidental expenses while travelling for work) 
• Tolls and parking fees  

For employees, travel expenses may be reimbursed by employers or claimed as allowable expenses for tax purposes, subject to Revenue’s guidelines.  

Reimbursement may be based on actual costs incurred or standard mileage/subsistence rates set by Revenue. 

When can you reimburse your employees for their travel expenses in Ireland?

You can reimburse your employees for travel expenses when they travel for work and the expense is incurred wholly, exclusively, and necessarily for business. 

This includes covering costs like transport, accommodation, and meals if they have to stay away from their usual workplace. If they use their own car, motorcycle, or bicycle for business travel, you can also compensate them based on mileage rates (see below). 

A quick example 

If one of your sales representatives needs to visit multiple client sites across the country, you can reimburse their train fares, hotel stays, and meals.  

Similarly, if an employee drives their own car to attend a conference on behalf of the company, you can cover their fuel costs based on the approved mileage rate. 

How to calculate the distance of a business trip in Ireland

To work out how far your employees travel for work, you’ll need to use the lower of either: 

• The distance between your employee’s home and the temporary place of work. 
• The distance between your employee’s normal place of work and the temporary place of work. 

A real–world scenario

Let’s say one of your employees (Carly) normally works in Dublin city centre but has to travel to Cork for a meeting. 

• The distance from Carly’s home in Bray to Cork is 250 km. 
• The distance from her normal office in Dublin to Cork is 220 km. 

Since the Dublin to Cork route is shorter, that’s the distance used for her travel calculation. 

The travel and subsistence rates in Ireland for 2025 

Now you know the when and how to reimburse your employees’ travel expenses in Ireland, let’s look at the how much. 

Thankfully, Revenue have set very clear guidelines when it comes to travel and subsistence in Ireland. 

Travel 

As we mentioned above, you can reimburse your employees for using their personal vehicles for business journeys. Don’t forget, this doesn’t include commuting from home to their normal place of work. 

You have the option to either reimburse the actual travel expenses incurred by the employee or provide a fixed mileage allowance per kilometre.  

Here are the civil service mileage rates for 2025. 

Subsistence  

When it comes to reimbursing your employees for subsistence expenses, you have three options: 

• Apply the civil service rates: this is the simplest option. You can reimburse your employees using the official civil service subsistence rates set by Revenue. These rates are pre-approved and tax-free.
  
• Set your own rates: alternatively, you can choose to set your own reimbursement rates, but they must not exceed the civil service rates.
• Reimburse actual expenses: another option is to reimburse your employees for the exact costs they incurred during their trip. 

What you need to know about ERR

Since January 1, 2024, new payment reporting rules, known as Enhanced Reporting Requirements (ERR), have come into effect. Here’s what you need to know: 

These rules, introduced under Section 897C of the Finance Act 2022, are designed to improve transparency in how businesses handle certain expenses. However, they also bring some compliance challenges that you’ll need to be aware of.

What needs to be reported 

You’ll need to report specific details about certain payments made to your employees: 

1. Small benefit exemption: you need to record the date the benefit was given and its value. 
2. Remote working daily allowance: report the total number of days covered, the amount paid, and the payment date. 
3. Travel & subsistence payments: for each payment, record the amount and date paid, under these categories: 

• Travel (both vouched and unvouched) 
• Subsistence (both vouched and unvouched) 
• Site-based employees (including ‘country money’) 
• Emergency travel 
• Eating on-site 

How do you report it? 

You must submit these details to Revenue at the time of payment or even before it’s made.  

Reports should be submitted via the Revenue Online Service (ROS), either manually or through your accounting/ERP software. 

Are you looking for a platform that can handle all your travel expenses in Ireland? 

With just a few taps, you can capture receipts, automate employee reimbursements, and effortlessly manage all your travel expenses in Ireland. Book a demo today to see Capture Expense in action.  

Do you know how to make a subsistence allowance claim? Are you familiar with the day and overnight allowance rates in Ireland? If you’re struggling with the civil service subsistence rates, you’re not alone.  

But don’t worry—we’ve got you covered. We’ll walk you through everything you need to know, from what a subsistence allowance is and when you can claim it, to the latest civil service subsistence rates for 2025. 

What’s a subsistence allowance in Ireland? 

A subsistence allowance in Ireland refers to a tax-free payment provided to employees to cover the cost of meals, accommodation, and other daily expenses incurred while travelling for work.  

These allowances, set by Revenue, are based on civil service rates and apply to both public and private sector employees. 

Employers use these rates to reimburse employees for business travel expenses without the need for detailed receipts—provided the trip meets Revenue’s qualifying conditions. 

When can you claim subsistence allowance in Ireland?

If you’re an employee in Ireland, you can claim a subsistence allowance when you meet all of the following conditions: 

1. You had to travel away from your usual workplace. So, if you’re just popping to a different desk in the same office, that won’t count!
2. The travel is necessary for your job. It’s not just about grabbing lunch somewhere different—you must be travelling as part of your work duties.
3. You’ve travelled more than 8km from your normal workplace. This means short trips within the local area usually won’t qualify (also, your regular home-to-work commute doesn’t count).
4. You’ve been away for more than 5 hours. Just running an errand or a short meeting outside the office? That won’t be enough. You need to be away for a significant part of your working day.

Are there any exceptions? 

Yes, not all work-related expenses can be reimbursed by your employer. The key rule is that expenses must be wholly, exclusively, and necessarily incurred for your job.  

If an expense has a personal element or isn’t essential for your work duties, it won’t be covered. 

Here are some common examples of expenses that won’t be reimbursed:

• Family travel costs: if your spouse, partner, or children travel with you for work, their costs won’t be reimbursed.
• Parking or traffic fines: if you get a fine for speeding or illegal parking, you’ll have to pay it yourself.
• Hotel extras: charges for things like laundry, minibar snacks, or personal phone calls. 

What to include in your subsistence allowance claim 

Here’s your checklist for a valid subsistence allowance claim. Make sure you provide full details for each trip separately. 

What are the civil service subsistence rates for 2025?

Here are the civil service subsistence rates set by Revenue:  

Accommodation subsistence rates in Ireland

Day allowances

These are Revenue’s domestic day subsistence rates, effective from 29th January 2025:  

To qualify, your assignment must be at least eight kilometres away from both your home and usual workplace. And if you’re claiming both a day and overnight allowance (see below), you’ll need to work at least five hours the next day. 

Overnight allowance 

Here are the civil service overnight rates, effective from 29th January 2025:  

It’s also worth noting that for vouched accommodation in Dublin, the reimbursable amount is up to €205.53 for accommodation, plus €46.17 for meals. 

What about civil service mileage rates in Ireland?

If you didn’t know already, you can be reimbursed for using your personal vehicle for work-related travel. 

Your employer can either cover your actual travel costs or pay you a fixed mileage allowance per kilometre. The great thing is that Revenue’s civil service mileage rates set clear guidelines for this—making the process really straightforward. 

If, however, you’re just after the civil service motoring and bicycle rates for 2025, then look no further:  

Cars (rate per kilometre)

Motorcycles (rate per kilometre)

Bicycles 

Stay on top of Revenue’s civil service subsistence rates

Whether your organisation uses Revenue’s civil service subsistence rates or sets their own, Capture Expense guarantees that everyone will be reimbursed on time, every time—no exceptions, no mistakes. Book a demo today to see just how easy it is to use.