Are you unsure of what you can reclaim VAT on? Here we’ve explained what you can and cannot reclaim any VAT on:
As a business, you can usually claim back any VAT you have paid on goods and services bought for business use, for which you have a valid VAT receipt. Remember, no receipt, no reclaim!
If the item you buy is also for personal use, you can only claim back a proportion of the VAT paid, only the actual business element of this item, mobile phone bills are a good example. You might use your mobile 60% for work and 40% for personal, in which case you can only claim back the VAT on the 60% of the purchase price and plan. You need to ensure that you have adequate records to support your VAT reclaim which shows how you calculated the business use percentage.
It’s usually a good idea to have separate phone bills for personal and business use, this way it’s easier when claiming back any VAT.
A Valid VAT Receipt
A valid VAT receipt includes the following:
- Name, Address and VAT number of the supplier
- Your name and address
- The date
- A description of the goods or services
- The cost before VAT
- The separate VAT amount
- The total amount that contains the VAT.
Having said that, many VAT receipts are actually a shorter version, simply containing the total amount paid, the seller’s name and VAT number. To work out any VAT quickly this website is very helpful – http://www.vatcalculator.co.uk/ . This is the amount you can reclaim.
Can you claim the VAT back on items brought in the EU?
Do you buy goods from the EU?
You can’t claim for goods bought in EU countries, although you may be able to reclaim VAT paid via the electronic cross-border refund system. You can reclaim VAT on products and services bought during the refund period, plus VAT on goods imported to Britain during the same timescale.
You can’t claim for VAT that has been invoiced incorrectly, where VAT has been levied on sending goods to another member state or exported items outside the EU.
Things you cannot reclaim VAT for
You can’t reclaim VAT on insurance, salaries, PAYE, postage, bank interest or business entertainment. However, VAT on entertainment for overseas customers can on occasions be reclaimed when that entertainment is very basic.
You can’t claim for anything you’ve bought specifically for personal use, or the products and services your business uses from VAT-exempt supplies. Also items you buy under VAT second-hand margin schemes and business assets transferred to you as a going concern are also exempt from VAT reclaim.
Not registered for VAT?
When your business isn’t registered for VAT, you don’t have to charge VAT to your customers, however, you also can’t claim any VAT back. That’s why so many smaller businesses try to stay under the VAT radar, under the registration limit (the current threshold is £83,000 – see https://www.gov.uk/vat-registration/when-to-register for further details) . Charging VAT to a customer who isn’t registered for VAT means they’ll have to cover this cost as well.
What about VAT post-Brexit?
Domestic VAT rules remain the same following the end of the Brexit transition period, however, VAT rules relating to imports and exports have changed.
Prior to Brexit and during the transition period, the UK was part of a regime called the EU VAT Regime, which meant that a UK business didn’t have to register for VAT in each EU country. Now though, as of 1st January 2021 Great Britain now has to treat EU countries like they do countries outside of the EU.
It can get very confusing so we’d suggest taking a look at this article by Sage explaining this in a bit more detail.
Do you need support with the VAT system?
If you need VAT support, we’re here to help, find your nearest Rosemary Bookkeeper today.