Claiming VAT in the Accounting Industry

Claiming VAT in the

accounting industry

Explore the reclaim opportunities available within the industry

Within the accountancy industry, there is very little room for error. Every cent is accounted for, and financial visibility is a key priority. However, even within a sector that is tapped into the intricacies of value-added tax and its impact on a business, there is still a significant portion of recoverable VAT that slips through the cracks.

Accounting firms, auditing firms, and even tax advisory firms all have a good grip on the VAT reclaim processes. However, that doesn’t exempt them from the burdensome, time-consuming, and resource-intensive processes that often come paired with VAT reclaim.

Ultimately, managing your clients’ funds and taxes might be second nature. However, maximizing the niche VAT recovery opportunities in the accounting industry is a whole other ball game – especially when the rules keep changing.

So, how can accountancy firms successfully reclaim significant VAT without compromising critical time, money, or resources? Here’s the deal.

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Who can recover VAT in the accounting industry?

In the accounting industry, most registered entities can rightfully reclaim the VAT portion of their business expenses. However, being eligible for VAT recovery is only the start of the VAT reclaim process. Many businesses, despite having significant reclaim opportunities, still fail to recover the majority of the VAT incurred both locally and internationally. To help maximize the reclaim yield common businesses that can recover VAT include the following:

VAT-registered accountancy firms:

In order to successfully reclaim VAT, it’s important that the accountancy firm is registered for VAT and provides taxable services. Moreso, as a business, it needs to adhere to correct record keeping and compliance with the relevant VAT regulations.

Accountancy Consultancy Services:

Accountancy consulting services, especially those dealing with international clients, may be eligible for VAT reclaim on expenses related to services. However, recovery hinges on correct documentation confirming exported services and compliance with relevant VAT rules.

Self-Employed Professionals:

The VAT reclaim scope is equally as significant to self-employed accountants. Provided that they are registered for VAT, they can reclaim VAT paid on a variety of eligible local and foreign expenses, such as VAT paid on professional development courses, professional memberships, software subscriptions, and other applicable expenses.

The types of VAT reclaim for accountancy: domestic and foreign VAT

For businesses within the accountancy industry, there are two overarching VAT reclaim types. The type of VAT recovery is largely determined by where the specific expenses occurred, locally (where you are VAT registered) or internationally (country where you are not and do not need to be VAT-registered). In the VAT landscape, these two VAT reclaim opportunities are known as domestic VAT reclaim and foreign VAT reclaim.

Overclaiming VAT

Underclaiming VAT

Each local jurisdiction is subject to its own VAT rules and requirements, especially considering eligible expenses, rates and deadlines. This often leads to companies claiming expenses that are non-deductible or incorrect. Get one expense mixed up? Not only will your claims be rejected as a whole, but it could lead to possible audits, and non-compliance penalties and fines.

Due to the resource-intensive task of filing returns that comply with country-specific legislation, businesses rarely have time to dive deeper into eligible expenses. This leads to significant VAT leakage and unreclaimed expenses, simply due to a lack of knowledge on local VAT rules and reporting requirements, or insufficient data to successfully track and manage eligible expenses.

Local VAT reclaim with VAT IT

Fortunately, your business doesn’t have to settle for a hit or miss approach when it comes to successful VAT recovery. At VAT IT, we combine experts in local VAT jurisdictions, with state-of-the-art tech to track, manage and administer your eligible expenses across all VAT-registered domains. Rest assured that you’re maximizing your return yield, including industry-specific local expenses like software and IT services, training and professional development costs, marketing and advertising and professional services – while staying 100% compliant.

Foreign VAT recovery with VAT IT

What is Foreign VAT?

When a business incurs international expenses, VAT still applies. However, the only difference is that it’s included at a country-specific rate and can’t be reclaimed via your local tax authority. However, that doesn’t mean it isn’t recoverable. The foreign VAT, or international VAT, recovery scheme allows non-resident businesses to reclaim the VAT incurred on business expenses in another country. Common eligible expenses include travel, lodging, car rental, and numerous additional costs. However, due to complex foreign VAT treatment, requirements, and legislation, many businesses fail to recover a significant portion of international business expenses.

Although the foreign VAT landscape can prove challenging, it’s worth noting that one of the most significant reasons that millions of euros are left on the table is simply due to unidentified foreign VAT reclaim opportunities. Here’s a look at some of the most overlooked expenses that may be eligible for foreign VAT reclaim.

Foreign VAT reclaim opportunities in accountancy

Identifying common recoverable expenses shouldn’t add to the complexities of foreign VAT reclaim. Here’s a look at common expenses that may enable your accountancy business to inject additional revenue into the business.

Meetings, events, conferences, conventions & trade shows

Have you attended a conference, event, or trade show based on accounting principles and spent a fortune? No worries! MICE (meetings, incentives, Conferences, and Exhibitions) are common international business expenses that may be VAT recoverable. While the recoverability may vary depending on the country, a business can generally reclaim the VAT portion incurred on booth rental, stand construction, promotional materials, attendance fees, transport costs, accommodation expenses, and sponsorship fees. These expenses, if added up and recovered correctly, can lead to up to 27% cost savings on all MICE-related expenses. MICE expenses often look different in each industry. In the accounting industry, teams often attend conferences and seminars that revolve around professional topics. With MICE reclaim opportunities in mind, business owners can dedicate themselves to more of these seminars without necessarily increasing their budget. Additional MICE-related events and expenses in accountancy may include:

Training and Continuing Professional Development (CPD)
Professional Association Memberships

International travel and entertainment

Accountancy firms can reclaim a significant portion of their VAT incurred on international travel and entertainment expenses. However, it’s important to note that this goes far beyond the VAT on travel costs. Although specific T & E costs that are eligible for VAT recovery may vary depending on the relevant international tax authority, in general, recoverable costs include taxi fares, accommodation costs, restaurants, and even business-related communication expenses such as VAT paid on international telephone calls or internet services. Another significant and often overlooked international VAT reclaim opportunity within T & E includes

VAT incurred on client entertainment expenses such as meals, drinks, or tickets to events. However, these expenses must be directly related to business activities and development and managing client relationships.
VAT incurred on staff entertainment costs such as company social events, team-building activities, or staff meals. However, these expenses vary depending on the relevant tax treatment and eligible expenses within the specific country.

How to avoid common blindspots in the VAT recovery process

The VAT reclaim process was not made for the faint of heart. That is if you’re taking on the entire process in-house. Are you ready to tap into your VAT reclaim potential and maximize your local and international VAT yield without compromising time, money, or effort? Well, we’re ready when you are! In the meantime, to help you best prepare for VAT reclaim opportunities, here are a few fundamental steps to keep in mind.

Consider the reclaim type and eligibility criteria

The type of VAT recovery scheme that applies to specific expenses will determine the way forward. Be sure to identify local from international eligible expenses. Thereafter, it’s imperative that you confirm your business’s eligibility to reclaim via the recovery type. This may involve checking compliance with local registration requirements for domestic VAT reclaim or keeping up to date with any amendments to foreign legislation that may affect international reclaim as a non-resident.

Consider any special VAT recovery schemes

Once tapped into the foreign VAT reclaim landscape (with the help of experts by your side), companies can better leverage and utilize industry-specific recovery schemes. In the UK, for example, the “Accounting Professionals Scheme” allows eligible accountants to reclaim their VAT on eligible expenses without needing to provide individual invoices. The reclaim is instead based on a fixed-rate percentage of their gross fee income. Schemes such as these are common and continuously improving and adapting in order to adapt to an evolving business environment and ultimately aiming to simplify and standardize the VAT recovery process.

Consider your internal collaboration and communication

Your internal organizational structure can have a huge impact on the success of your domestic and international VAT reclaims. To maximize the recovery process and mitigate any risks or potential roadblocks, effective collaboration is essential. This includes communicating the correct information on invoicing instructions and record-keeping to all relevant parties as well as collaborating with departments outside of the finance department to ensure you identify any hidden VAT opportunities. This is where spend visibility becomes a critical component in identifying, managing, and claiming eligible expenses across HR, sales, marketing, and finance.

How can VAT IT build up your VAT yield?

Elevate your business finance with one centralized VAT solution for all your industry-specific local and international VAT reclaim needs. From tracking eligible expenses to ensuring compliant invoicing and error-free reclaim submissions. As an extension of your finance team, the VAT IT team provides tech when it counts and human when it matters. Ditch the heavy-lifting and common blindspots in one fell swoop and replace them with our unparalleled account management, spend visibility, and country-specific experts to ensure that when it comes to maximized VAT recovery, you’ve always got a team you can count on.

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