How do you claim the input VAT on expenses reimbursed to employees?

[J7J]

Hi,

How do you go about claiming the VAT on the expenses that employees claim back to be reimbursed (ie. stationery bought on behalf of company etc.)

In your salary expense account you would have the amount including VAT as part of the salary paid to them. So the "stationery" expense would be in your expense accounts (now in salaries) including VAT.

How do you now show the expense as excluding VAT in your expense accounts and claim input VAT on this expense?

Do you reallocate this expense from salaries to the correct expense account (ie. stationery)?

Please advise.

Thanks!

[Dave A]

To my mind, reimbursed expenses such as for stationery has got nothing to do with the salary expense account, and I don't post any reimbursed expenses via it.

For staff who are regularly associated with reimbursed expenditure, I open a balance sheet account for each person to track and repay expenditure incurred on behalf of the company. The odds and sods are processed through petty cash.

[CLIVE-TRIANGLE]

Dave is right. Furthermore, the ITR14 now requires separate disclosure of:
Commission paid
Employee expenses:Wages and salaries (excluding medical, provident fund and pension)
Employee expenses:Group Life
Employee expenses:UIF contributions and SDL by the company
Employee expenses:Pension and Provident fund contributions by the company
Employee expenses:Membership of a professional body
Employee expenses:Training

So, unless you separate these accounts, you will come unstuck when doing the tax return. Grouping some for Income Statement purposes is one thing, but you can't do so tax.

Similarly, some employers recover some expenses incurred from employees; use of business telephone, uniforms provided in excess of agreed number, and so on. These amounts are not remuneration but are a reduction of the related expense account. The dilemma is that this constitutes a taxable supply, or at least a reduction of the input credits claimed, and the VAT sections of the SD14 will age you overnight.

Clearly the shortcut way of accounting for payroll by debiting the payments made to salaries and wages and then accruing the unpaid bits at year end will not hack it, unless you are prepared to spend days unraveling the whole lot at year end.

[Mynhardt]

Clive is correct again.

Small clarification:
The additional detail required (as Clive gave an example for above) would only be necessary for Medium to Large businesses (as per SARS' classification). The new ITR14 returns for small businesses' are very similar to the old companies tax return.
I agree that one should have a look at your accounting system to determine whether you will be able to easily produce the required info for the new ITR14 forms (with the increased disclosure requirements) without any hassle. It can be extremely tedious to extract the required info from the GL's of an accounting system which wasn't setup to account for the disclosure requirements of the ITR14 forms as well.

The following company groupings determines the level of disclosure on the ITR14 return:

• Dormant companies.
• Share Block Company / Body Corporate: As defined in the share blocks control act and sectional titles act.
• Micro Business: Less than R1 million revenue and less than R5 million total assets.
• Small Business: Less than R14 million revenue and less than R10 million total assets.
• Medium to Large Business (requires much more detailed disclosure than in the past): Any other company not matching the above classifications.

Please have a look at the Comprehensive guide to the ITR14 return for companies for more detail about what information you should be able to quickly extract from your accounting system for ITR14 submissions.

[J7J]

Hi all,

Thank you for your responses.

Feeling quite nervous about that first new format ITR14 submission...