Domestic travel VAT: Why you need to step out of your status quo comfort zone
By: Carl De Lange
Tags: Admin, Time, Efficiency, Vat, Finance

There’s a much better way to reclaim VAT. I’ll explain it in some detail below. But first, I want to take you for a quick tour of my kitchen.

I started 2020 pretty satisfied with my work-from-home routine. It felt businesslike and disciplined. I would sit at my kitchen table and get down to work. It wasn’t perfect. But it seemed ok. Sure, I sometimes had a weird twinge in my shoulder. Yes, my neck was hunched over as I squinted down at the screen. Actually, if I was honest with myself, it probably wasn't that great. But it didn’t seem like a big deal. Not worth taking the time to sort it out.

Then one day my partner, clearly a more sensible person than I, bought me a work desk. It was a game changer. I simply could not believe how much better I instantly felt. The tension in my back was gone. There’s less stress on my poor crunched up vertebrae. I have room to put all my stationary and reference material. I no longer have to worry about cornflakes on my keyboard.

Of course it was better. How could it not be? An ergonomically-designed desk purpose-built for comfort and productivity vs a kitchen table. What had I even been thinking?

The right tools for the job

My new desk is bad news for my chiropractor. But what does it have to do with outsourcing your domestic T&E VAT?

My point is that you need the right tools for the job. That’s obvious enough. But you also need the expertise and experience to know what those tools are. And to know when you’re actually doing yourself a disservice by sticking to business as usual.

Too often, managers are satisfied that the existing processes seem to be working fine. So why change them? It’s a big reason many companies don’t adequately claim VAT on travel and entertainment.

But here’s the thing. Without the right technology and processes in place, it’s hard to track all the invoices employees submit when they travel locally. Then there’s all that admin. It’s an extremely tedious and time-consuming process.

Plus there’s uncertainty about compliance. Your finance team probably aren’t VAT experts in every region you operate in, they can’t be 100% sure of all the subtleties of compliance.

Outsourcing should be a no brainer. But it can be too easy to be complacent about the status quo.

Your employees are specialists, too (so let them specialise)

Here’s a statistic that recently caught my eye: 87% of finance staff say they’ve worked overtime in the past month.

That means they’re not getting through all their work during office hours. Why not? It’s not because they’re incompetent. And they likely don’t spend the whole workday playing Candy Crush.

In many cases, skilled finance staff spend hours each day dealing with boring admin. It’s demoralising and it wastes time.

The thing is, a lot of that admin is absolutely crucial. It needs to be done, and it needs to be done right. The problem is that managers often think ‘what’s the point of outsourcing if I’ve hired all these staff?’

That gets things precisely backwards. Instead, your mindset should be ‘what’s the point of hiring these skilled employees and then making them do admin all day?’

Outsourcing your domestic T&E to a company like VAT IT isn’t a concession that your finance team isn’t any good. On the contrary, it’s an opportunity to free the team up to be more productive and to do what they really are good at (and what they’re passionate about).

No more risky business

There’s another reason in-house travel VAT recovery is often so suboptimal. Often companies just don’t bother to claim.

The reasoning goes something like this. Sure, recovering input VAT is an opportunity for significant savings. However, an incorrectly filed claim could spell disaster. From a risk-management perspective, it’s better to avoid catastrophic ruin, even if it means forgoing substantial benefit.

There’s certainly something to be said for that approach. After all, ensuring your domestic travel VAT claim is 100% in order is hard to do in-house. Maybe a couple of invoices are missing. Or your invoices are in the wrong format.

Next thing you know, you get audited. Your overworked finance department made a minor oversight on the invoice compliance of a few travel receipts. Now you’re paying penalties plus interest and have retrospective audit requests coming out your ears.

What if you could eliminate the risk and reap the rewards?

VAT is complex, but it’s not a trap

VAT can be really complex and there are a lot of moving parts. Everything needs to be accounted for. Filing needs to be accurate. Manual processes make errors more likely than not. On top of all the admin, employees can’t possibly be expected to know all the ins and outs of compliance.

At the same time, the tax system wasn’t set up to catch companies out. Tax authorities want businesses to flourish. After all, reclaiming T&E is an opportunity to actually get money back.

So how do you reconcile those realities? It starts by stepping out of the status quo comfort zone.

Sure, stopping what you’re doing to investigate a new process doesn’t seem worth it. But once if you’ve done it, you’ll wonder what took you so long.

As an input VAT expert who thinks about this stuff all day (from my ergonomically engineered desk) I can tell you that there’s just no way your staff can accurately review every expense invoice line-by-line while also staying up-to-date with VAT regulations in multiple countries.

The solution is so obvious it can be hard to see. Outsourced smart VAT technology, managed by specialists.

That’s not just theory. I put it into practice every day. I’ve seen clients’ input VAT reclaim increase by as much as 50%. It’s a lot of gain without any pain.