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Make VAT Reclaim a Key Part of Your Cash Strategy:

4 Best Practices

W H I T E PA P E R

© sharedserviceslink.com Ltd and Quipsound 2021.

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In a difficult economic climate, companies turn to managing the one thing they can control – their cost base. Investments get postponed, budgets re-evaluated, and all cost types scrutinized. The overall goal

is to create a cash buffer that will help the organization sustain a level of “business as usual,” avoid insolvency, and bolster all chances of possible growth. But while companies tighten their belts, there is actually sizeable cost reduction to be made for the short, medium and long term – in the area of VAT recovery.

A 2017 study found that UK businesses were missing out on a staggering 54% of travel and entertainment expenses reclaim entitlement (Vanson Bourne, 2017). An OECD study revealed about half of the 300 businesses surveyed only recovered 50% or less of the foreign VAT they incurred, and almost as many had stopped claiming VAT from some countries altogether.

These recoverable VAT amounts are significant, often adding up to the millions, and the fact is that they can be recovered quickly, helping companies reduce their cost base, improve profits and increase cash reserves. But, of course, the recovery process is not without its challenges!

This white paper looks at some of the most effective

Recoverable VAT amounts are significant, often adding up to the millions. They can be recovered quickly, helping companies reduce their cost base, improve profits and increase cash reserves.

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ways companies can reclaim VAT.

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Now is not the time to be leaving money on the table.

Reclaiming VAT SpendWhile most companies will have a process for reclaiming VAT from invoices, there are usually some

areas of spend or some suppliers that make it more difficult.

If invoices fail to quote the correct information (the supplier’s business address, VAT number or VAT

amount), it could invalidate your claim. Even if you have very tight VAT controls in your organization,

you can’t always consistently control the information on the invoices you receive. And if you are

incorrectly charged VAT on an invoice, it can be a time-consuming process to contact the supplier to

amend the details and resubmit the correct invoice.

The VAT landscape is also complex and constantly evolving, so it can be difficult to keep up with

what exactly you can reclaim and at what rate. Mix in the complication of cross-border VAT

obligations and chasing suppliers for correct invoices – and it can become a real headache.

Employee T&EOne of the main areas that companies look to reclaim VAT is in employee Travel & Entertainment

expenses. While 2020 has put a halt to global travel, there are still some important opportunities

when it comes to domestic travel.

Travel is very slowly recovering, but won’t return to 2019 levels for quite some time. For the near

future, T&E spend will still be down from pre-pandemic levels, but the nature of the spend will be

different: a higher proportion of domestic travel, subscriptions to providers that assist with home-

working, and domestic expenses.

Because of the complexity and size of international T&E, companies often outsource international

recovery, and don’t invest time and energy into domestic recovery. This means that for many, there

is a significant opportunity for companies to focus more on – and reclaim more from – domestic

VAT on T&E spend.

Why aren’t companies doing this already?

• It can be difficult and time-consuming to correctly identify recoverable VAT in the high-

volume of domestic T&E invoices

• Domestic T&E claims often pertain to smaller invoices and have been historically overlooked

• The risk of getting it wrong and falling foul of compliance rules and facing possible penalties

can engender fear, blocking any action taken to reclaim VAT

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4 best practices to ensure higher levels of VAT recovery

If this was very easy, every company would be doing VAT recovery perfectly already. Here are

some best practices to help you claim higher levels of VAT – with ease.

1 Technology can streamline the process of handling large volumes of dataAnalysing large volumes of invoices for potentially quite small returns can feel dauntingly tedious

for any already-overburdened team. Software, however, is great at dealing with high volumes of

invoices and quickly locating the reclaim opportunities. In fact, technology can enable a full data

review for any missed opportunities, and can search for transactions on older invoices that are still

recoverable (in some countries you can go back several years).

However, there’s only so much of the process that can be automated. Different tax authorities

require different information, and when invoices are received in a variety of formats, you will still

need some experts to audit those files as well. Automation – and ensuring the information arriving

with your tax team is accurate – will make the process easier, and lay the foundation for a more

efficient and profitable claims process. But you will still need to invest time in the audit process, as

it’s not worth taking shortcuts when dealing with tax authorities.

2 Ensure you are only including compliant invoicesIncluding non-compliant invoices raises your risk of a VAT audit.

Before submitting a claim, it’s crucial to check every invoice and

all supporting documentation to ensure each transaction meets

the relevant tax office requirements. If any invoices are not fit-for-

purpose, you need to contact the supplier and obtain updated

documents which will fully support your claim. This is a task you

can either do in-house, or work with a third-party provider who

can contact suppliers on your behalf.

Your VAT reclaims need to be air-tight. As the Covid-19 pandemic

has led to unprecedented government spend, it’s inevitable that

tax authorities will be looking to ensure they receive all the tax

entitled to them, and aren’t issuing any unnecessary refunds.

Don’t give the tax authorities any reason to reject what you

believe is a valid claim.

VAT reclaims need to be air-tight. Tax authorities will be looking to ensure they receive all the tax entitled to them, and aren’t issuing any unnecessary refunds. Don’t give the tax authorities any reason to reject what you believe is a valid claim.

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3 Educate your employeesIf your business is prioritising healthy cash management, there should be education of how

employees at all levels of the business can affect this. Many employees, even in finance, won’t

necessarily understand the value of VAT reclaims, and it may not even be on the radar of

employees submitting expenses.

If you’re putting together a business case to improve your VAT reclaim approach and opportunity,

find ways to share this with the wider business – AP and AR certainly, but also procurement and,

in fact, anyone who may submit an employee expense. Help employees understand that small

changes in their actions can help the company reclaim thousands or even millions. Then show

them what kinds of investments could be made with the savings.

4 Consider using a third partyEven with the best processes in place, one of the biggest challenges is that every tax authority has

different rules and requirements, and submitting accurate claims and communicating with the

various authorities around the world is a difficult and time-consuming task.

VAT and indirect tax teams tend to be quite small and often overburdened as it is. You can partner

with specialists who can assess all of your invoices and supporting documentation, work with

suppliers to ensure access to compliant invoices, submit the claims and manage all necessary

communications with tax authorities. Some companies don’t even charge any up-front fees, and

will only take a portion of what is reclaimed.

Top suggestions for improving VAT reclaim in the near-term and long-term:

Nobody wants to be paying more in VAT than they have to. However, many companies aren’t

reclaiming nearly as much as they are entitled to.

Here are some actions you can start taking today, and some that may take months to implement,

but will have a pay-off in the long run.

Explore any un-tapped opportunities of VAT reclaim. Start to understand what you are

reclaiming, and if there are any areas you might be missing. Domestic VAT has been historically

underclaimed, and a number of EU countries allow for recovery from past years. Evaluate recovery

opportunities, and if you haven’t authorized an assessment of domestic reclaim, act now.

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Use a third party to manage the VAT reclaim for you. Indirect tax teams are generally

small and under-resourced. Keeping up with constantly-changing legislation and ensuring

compliance may be the most a tax team can handle at the moment. If they don’t have extra

capacity to take on time-consuming reclaims processes, third parties are equipped to come in

and handle them for you. Some providers do not require any fees up front and take their fee from

reclaimed VAT, so it could be a quick business case to put forward.

Important questions to ask your partners:

• What is their pricing model? Do you pay up front? Or is the fee taken as a proportion of

successful claims?

• Will they work with your existing T&E framework and help in any efforts to go electronic?

• Will they blend technology with people expertise? A combination of Robotic ProcessAutomation (RPA) and experienced processing staff will ensure nothing is missed anderrors are highlighted.

Educate your team on why VAT matters and what to

look for on invoice. Getting your company into a healthy cash

position is about developing a culture that supports this. You

need to involve more than AP, AR and Tax. Start some programs

that explain to all employees who touch, issue or process

receipts and invoices, as well as anyone who might submit an

expense, about why your cash position matters, and the huge

impact that VAT can have. The more problems you can stop

from happening ‘upstream’ in AP, Procurement or expenses, the

easier your claims process will be down the line.

Move from a paper-based T&E recovery process to an electronic one. Paper in any

finance process will slow you down. It is much more difficult to get an accurate view of the data on your

key documents if they are in binders, desks and post rooms. While there will be some up-front costs

to investing in a digital solution, it will make it easier for you to enforce compliance with your existing

T&E rules and will make your VAT reclaim process easier. An increase in VAT reclaim that comes from

automating could easily offset your investment – and lead to a quicker return on investment.

ConclusionVAT Recovery is an important tool in your arsenal to improve your cash position without having

to cut costs or drive revenue. While there are definitely lots of things you can start doing now to

make the process easier and improve your chances of successful VAT reclaims, it’s never worth

taking shortcuts when dealing with tax authorities. Ensuring you have high quality information,

compliant invoices, and an airtight claim will still require expertise, whether it’s in-house or with

a third-party partner.

VAT Recovery is an important tool in your arsenal to improve your cash position without having to cut costs or drive revenue.

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About Quipsound

www.quipsound.com

© sharedserviceslink Ltd and Quipsound 2021. No copy or visual can be used in part, as a phrase or in whole without the written permission of sharedserviceslink Ltd. The concept of this site belongs to sharedserviceslink Ltd and cannot be re-created by a third party for the purpose of an event, article, report or any other written product, without written consent made available by sharedserviceslink Ltd. Any images used on this website are originals, royalty-free or credited where necessary.

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Quipsound works with you to identify all recoverable VAT under each Directive; 2009/09/EC (former 8th Directive), Directive 86/560/EEC (13th Directive) and Domestic Schedules, supporting hard copy and electronic preparation and filing to meet changing Tax Office requirements.

Quipsound checks that all invoices and any other supporting documents meet the relevant

tax office requirements. If they are not fit-for-purpose, we contact the supplier and obtain

restyled documents which will fully support your claim.

Quipsound provides the restyling of all invoices as part of our standard contingency fee –

you do not pay extra for this. Invoice re-styling is where an invoice, often from a hotel, is

returned to the supplier to have the information amended to meet the requirements of the

relevant tax authority.

If you have been incorrectly charged VAT on an invoice, Quipsound will recover the VAT

directly from the supplier on your behalf.

Quipsound recovers incorrectly charged VAT from suppliers as part of their standard

contingency fee – you do not pay extra for this.

Quipsound fully processes the refund, files the claims on your behalf and manages tax

office enquiries

Quipsound’s Tax Office Team, working closely with your dedicated Account Manager, take

responsibility for ensuring translation requirements are managed, deadlines are met and

you are kept updated of progress at all times.