The official Newsletter and Information Service of the City July
Council’s VAT & Taxation Advice Office incorporating the City
Council’s VAT Manual Update Service. 2010
Petty cash expenditure and imprest accounts
Section 9 of the VAT Manual covers the recovery of VAT on petty cash expenditure, imprest
accounts and employee expenses. Given the number of queries still raised with the VAT and
Taxation Advice Office, however, this article considers the issues to be taken into account for
VAT purposes in managing petty cash and imprest accounts.
The first key issue is that VAT can only be recovered where a valid VAT invoice, or ‘VAT
receipt’ as appropriate, is held in support of the expenditure. This applies just as much to petty
cash expenditure and imprest accounts (including credit and purchasing card accounts) as it does
to ‘mainstream’ creditors payments.
However, with petty cash and imprest payments, the amount is usually likely to be less than £250
(including VAT) and so the rules applicable to less detailed VAT invoices or ‘VAT Receipts’ will
In many cases a till receipt will meet these requirements providing it includes the following:
- the name, address and (most importantly) VAT-registration number of the supplier,
- the date of the purchase,
- a description sufficient to clearly identify what was purchased,
- the total amount payable, and
- the rate of VAT applicable to the purchase.
In practice, given the small amounts involved, Customs will generally accept a receipt which
does not meet all these requirements providing it clearly demonstrates that the Council has
made a VATable purchase from a VAT-registered supplier and has incurred VAT. Thus, a
till receipt that gives the supplier’s name and (critically) their VAT-registration number,
together with a description of the items purchased sufficient to determine their VAT
liability and the total amount paid will normally be acceptable.
There are just four exceptions where VAT can be recovered without a valid VAT invoice (or
- telephone calls made from a pay-phone,
- purchases from a coin operated vending machine,
- car park charges, and
- road, bridge and tunnel tolls
provided the supplier is registered for VAT and the cost, including VAT, does not exceed £25.
VATTax is published by the City Council’s VAT and
Taxation Advice Office, Room B2.10, New Walk
Centre (Tel: 0116-252-7470). Articles and items from
VATTax may be freely reproduced and used but the
City Council accepts no liability whatsoever for any
loss occasioned to any person acting or refraining from
action as a result of material herein.
As these are more relevant to reimbursing staff expenses, they will be considered in more detail in
a future article in VATTax.
Identification and coding of VAT
When coding out petty cash or imprest account payments, you will first need to identify those
payments which include VAT and apportion such VAT, using the appropriate VAT code, as
If there is no ‘VAT receipt’ to support the expenditure, even if VAT has been incurred it cannot
be recovered. In such cases you will need to charge the whole amount to the revenue budget in
question using the VAT code ‘PN’.
Where there is a valid ‘VAT receipt’, it will be necessary to identify the VAT category by
reference to the description of the goods or services purchased given on the receipt. Full details
of the various VAT categories can be found in Section 4 of the VAT Manual but for petty cash and
imprest account payments, there are unlikely to be any lower-rated or (with the possible exception
of on-street car parking charges) any ‘non-business’ or ‘outside the scope’ purchases.
Thus the most important thing is to determine whether the purchase was zero-rated or exempt
from VAT. If it was neither of these then the VAT incurred can be recovered as described below.
Zero-rated and VAT-exempt items
A full list of items which are zero-rated is given in Section 4 and Appendix EA of the VAT Manual
but for petty cash or imprest account payments, the most likely are:
- food and drink (except catering, most confectionery, including chocolate, sweets and crisps,
and alcoholic and soft drinks, including bottled drinking water),
- books, magazines, newspapers, maps, etc (but not stationery such as diaries, notepads, etc, or
- transport (notably public transport fares but not taxi fares; taxi fares are liable to VAT where
the taxi operator is VAT-registered, otherwise outside the scope of VAT, in which case use the
VAT code ‘PN’),
- drugs and medicines bought on prescription (but not ‘over the counter’ drugs and medicines
which are liable to VAT at standard-rate),
- charities (notably second-hand items bought at a charity shop),
- clothing and footwear for young children.
A full list of items which are exempt from VAT is similarly given in Section 4 and Appendix EB
of the VAT Manual; for petty cash and imprest account payments, VAT-exempt items are less
likely and those most likely to be encountered are limited to:
- insurance premiums,
- postal services (eg stamps),
- betting, gaming and lotteries (eg National Lottery tickets),
- finance (eg bank charges, commission on travellers cheques),
- sports competitions and physical education (eg entry fees to sporting events),
- fund-raising events by charities (eg entry fees to charity fund-raising galas, etc),
- education (eg course fees and examination services),
- health and welfare (eg eye-tests, prescription charges, fitting of hearing aids, etc).
Note though that these lists are not exhaustive and do not cover all items that may fall under the
general description listed; in particular there are often exceptions and exceptions to the
exceptions and/or conditions that have to be met.
Where the purchase is of zero-rated or VAT-exempt items, you can charge the whole amount to
the revenue budget in question using the VAT code ‘PZ’ or ‘PE’ as appropriate.
Standard-rated items and VAT recovery
Where the purchase is not of zero-rated or VAT-exempt items, you will need to calculate the
VAT element using the VAT fraction, ie currently 7/47ths. This can most simply be done be using
the VAT code ‘PT’ which will automatically deduct 7/47ths from the total cost of the standard-
rated payment, charge this to VAT and the balance to the revenue budget identified.
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