VAT receipts for expenses: what HMRC and Revenue accept

Most businesses lose VAT on employee expenses in the least dramatic way possible: the money was reclaimable, but the piece of paper was wrong. A card slip instead of a VAT receipt. A receipt with no VAT number. A photo nobody took. The rules on VAT receipts for expenses are stricter than most staff realise, and the difference is real money — a fifth of the net cost of every standard-rated purchase.

Here is what HMRC and Irish Revenue actually accept, the evidence that firms lose VAT here, and what it adds up to per year.

This article is general guidance, not tax advice — check your own position with your accountant or adviser.

The basic rule: no valid VAT invoice, no reclaim

To reclaim input VAT on business expenses, HMRC requires valid VAT invoices to support the claim. A full VAT invoice, per VAT Notice 700, section 16.3, shows the supplier's and customer's name, address and VAT registration number, an invoice number and date, a description of the goods or services, quantities and unit prices, the VAT rate, the VAT amount and the total payable.

For most employee expenses — a meal, a taxi, parking, stationery — nobody gets a full invoice. That is what the simplified invoice is for.

The simplified VAT invoice: £250 or less

Notice 700 (section 16.6) lets a supplier issue a simplified VAT invoice where the total value of the supply is £250 or less including VAT. It must show:

• the supplier's name, address and VAT registration number
• the date (time of supply)
• a description that identifies the goods or services
• for each VAT rate charged, the total amount payable including VAT and the VAT rate

A normal till receipt from a supermarket, restaurant or petrol station usually qualifies — that is exactly what it is designed to be. The items staff bring back that do not qualify are the ones below.

Why a card-terminal slip is not enough

The slip the card machine prints proves a payment happened. It does not prove VAT was charged, at what rate, or by whom. Notice 700 is explicit: a credit card or other payment card sales voucher is not a VAT invoice. A retailer may adapt one into a VAT invoice, but only by adding their VAT registration number, the VAT rate and a description of what was supplied — which the machine alone never prints.

So the single habit that saves the most VAT is also the simplest: take the VAT receipt from the till, not just the slip from the card machine.

Claims that fail — and receipts that are fine

Two more UK rules matter for expenses:

• Business entertaining is blocked. You cannot reclaim VAT on the cost of entertaining or providing hospitality to people you do business with — theatre tickets, client dinners, hospitality boxes. No receipt fixes this; the reclaim simply is not allowed.
• Receipts with no VAT on them are legitimate. Plenty of real business expenses carry no reclaimable VAT: zero-rated purchases (most cold food, books, train travel), exempt supplies, or suppliers who are not VAT-registered. There is nothing to reclaim, but the expense is still valid and still belongs in your records — HMRC's record-keeping rules expressly cover zero-rated and exempt items. An expense process that rejects a receipt because "the VAT is missing" is wrong.

And the paperwork has a long tail: VAT records, including the invoices you receive, must be kept for at least six years in the UK.

Mileage: the VAT hides in the fuel

When you pay employees a mileage allowance for business trips in their own cars, VAT Notice 700/64, section 9 lets you treat the fuel element of that allowance as input VAT, worked out with the VAT fraction. But the conditions are strict: the allowance must be based on mileage actually done, you must keep per-employee mileage records, and you must retain fuel VAT receipts (full or simplified) covering the claim — a fuel receipt dated after the claim period cannot support it. HMRC's practical advice is that employees who use their cars for business should keep every fuel receipt.

The Irish rules

The shape is the same in Ireland, with some sharper edges:

• A valid VAT invoice is required to support a reclaim, per Revenue's guidance on who can reclaim VAT.
• Food, drink and entertainment VAT is not reclaimable at all — Revenue's non-deductible list includes food, drink and other personal services for employees, accommodation (except qualifying accommodation for a qualifying conference), entertainment, and petrol unless it is stock-in-trade. A staff lunch in Dublin carries VAT you cannot recover, however good the receipt.
• A till receipt is not automatically enough. Ireland's simplified invoice is allowed where the invoice amount is not greater than €100, and must show the date of issue, the supplier's full name, address and registration number, a description of the goods or services, and the tax payable or the price exclusive of tax. A receipt without those details does not qualify.
• Records are kept for six years. Employers reimbursing actual expenses must retain all receipts, and keep records for six years after the end of the tax year.
• Expenses are now reported to Revenue. Under the Enhanced Reporting Requirements, from 1 January 2024 employers report travel and subsistence and certain other payments to Revenue via ROS on or before the payment date — so sloppy expense records are now visible ones.

The evidence that businesses lose VAT here

In a vendor-commissioned SAP Concur survey of 500 UK finance leaders (March 2021), 25% said they do not reclaim VAT because employees submit missing or incorrect information, and 25% skip reclaims when a claim mixes VAT rates. Treat the exact figures with care — it is a vendor survey — but the direction matches what practitioners see.

The tooling does not always help. A Xero Product Ideas thread asking for the ability to correct the VAT amount on a Xero Expenses claim has been open for four years; one contributor wrote, "I wonder how many non-accountants just accept the Xero values and therefore have incorrect VAT returns." And on AccountingWEB, a practitioner's blunt warning about inspections: "if you are missing 30% of the tax invoices you are looking at an assessment." Missing receipts do not just lose you the reclaim — they can cost you VAT you already claimed. This is one of the quiet costs we tot up in the true cost of manual expense claims.

What it costs: two worked examples

One meal. A £30 working lunch at the standard 20% rate includes £5 of VAT (the VAT fraction of a VAT-inclusive price at 20% is one-sixth). With a valid VAT receipt, that £5 comes back. With only a card slip, it does not.

A 50-person firm. Illustrative assumptions: 75 expense claims a month, average £40, of which 60% are standard-rated purchases with reclaimable VAT.

How we worked this out: every figure above is an assumption, not a measurement — 75 claims, £40 average and the 60%/25% shares are chosen to be conservative for a 50-person firm; the arithmetic is simply the VAT fraction (1/6) applied to the standard-rated spend. Around £3,600 a year of reclaimable VAT depends entirely on receipts being valid, and at the survey's one-in-four failure rate about £900 of it never comes back — before counting claims already made that a six-year inspection could unwind.

A practical checklist

For staff:

• Ask for the VAT receipt, not the card slip. The card machine's output is never a VAT invoice.
• Photograph the receipt immediately — thermal paper fades, pockets eat paper, and a receipt photographed at the till is never lost. (Why immediate capture beats batch scanning is a story of its own: see why receipt scanning apps get receipts wrong.)
• Check the VAT number is on it. No supplier VAT number, no simplified invoice, no reclaim.
• Don't panic over receipts with no VAT — zero-rated and non-registered suppliers are normal. Submit them anyway.
• Keep fuel receipts if you claim business mileage in your own car.

For finance:

• Tell people the £250 (UK) and €100 (Ireland) simplified invoice rules exist — most staff have never heard of them.
• Separate entertaining from staff subsistence at the category level, so blocked VAT never lands in a reclaim.
• Keep the receipt image attached to the expense record for the full six years.
• Review VAT captured versus VAT reclaimed by category each quarter — the gap is your leak.

How Costrix helps

Costrix is built for exactly this paperwork. When an employee photographs a receipt, it reads the merchant, date, total, VAT amount and VAT number off the image and asks the person to confirm — and it checks the VAT number against the UK and Irish formats, so a number in the wrong shape is caught before it reaches a VAT report. It records the VAT amount printed on the receipt, whatever the rate, and treats a receipt with no VAT as perfectly fine rather than blocking the claim. The receipt image stays attached to the expense for as long as the expense is kept, and finance gets a VAT position report showing captured VAT by category and how much of it has a supplier VAT number behind it — so the leak in the checklist above is a report, not a guess.

What to do next

If you suspect your firm is leaving VAT on the table, the fix starts with capturing a valid receipt at the moment of purchase. Start a 7-day free trial of Costrix and see what a month of clean, VAT-ready expense records looks like.