Practical Insights on Reclaiming VAT

Featured article by Mladen Pupovac, Independent Technology Author

On matters reclaiming VAT, there are goods and services that can be claimed and others that cannot be reclaimed. Whether your business is big or small, understanding what can be claimed or not might prove to be tricky. Below is a guide explaining the rules needed to be followed when claiming VAT on goods purchased and other expenses.

The UK Government through the HMRC regulate what you can and can’t reclaim.

Normally you can claim back the total portion of Value Added Tax paid out by providing the goods or services receipts and invoices you purchased used ONLY for business.

These rules change if purchases made in the business are for personal and private use. In such a situation one can only reclaim VAT on the business part of the purchase that was paid out.

An example would be if half of the phone calls made in the business were private, reclaiming VAT would only be 50% of the total VAT of the purchase price of the phone and its service plan.

In order to support any claim, it is of utmost importance that one should keep all VAT records as they highlight how the business qualifies for reclaiming VAT. This means you must have received valid VAT invoices and receipts from your various transactions.

Goods Bought But Cannot Reclaim VAT

Here are certain items where reclaiming VAT is not allowed.

– Goods bought from EU countries although the electronic cross-border refund system may give way to one reclaiming VAT.
– Goods sold to your business under the VAT second-hand margin schemes.
– Goods used for personal and private use only inclusive of business entertainment costs.
– Goods and/or services used to make VAT exempt supplies.
– Goods transferred to your business as a going concern.

Note: You can claim VAT back on staff travel, vehicles and fuel costs that have been paid, as the accounting process permits it.

Claiming VAT Before Registration of Business

Given certain conditions, you can reclaim VAT on goods and services purchased before you registered your business. However, these purchases come with some time limitations for claiming.

Capital Assets Worth £50,000 And Over

Specific regulations apply on reclaiming VAT on expensive assets bought like;

– Boats, aircrafts, and ships valued at 50,000 pounds or more before VAT
– Land and buildings valued at 250,000 pounds or more before VAT
– Equipment e.g. computers valued at 50,000 pounds or more before VAT

Note: VAT reclaimed on expensive goods purchased over several years can be adjusted by the Capital Goods Scheme.

How To Access Your VAT Refunds

Log in to your HMRC online account. Here you will be able to see any VAT refunds owed to you and what you can claim. Submit your VAT Return and make a claim.

Give your account details even when you have already set up a direct debit for VAT Returns. You are allowed to make any changes at the registration details section in your online VAT account.

Once HMRC receives your return expect your VAT refund in 10 days. It is highly advised that you wait for 30 days before reaching out to the HMRC if you don’t get any feedback