November 24th, 2020
What can I claim VAT on?
As you register your business for VAT, you will start charging VAT on the products or services you sell. Registering also entitles you to claim back the VAT you’ve paid elsewhere.
When you make business purchases, in most cases you’ll pay VAT that you will be able to reclaim. There are some rules and restrictions, so when you reclaim VAT you’ll need to make sure that your purchases aren’t exempt.
You can only reclaim VAT on purchases made for your business. If something’s bought for both personal and business use, you will need to consider what percentage of time it’s being used for your business. You can only reclaim VAT for the business portion.
What are the VAT restrictions?
As well as being for business use, any purchase you make must meet other requirements before you can reclaim VAT.
You can only reclaim VAT on your business expenses.
You can’t reclaim VAT if your purchase involves:
Materials for VAT – exempt products
If you purchase materials or ingredients to make products that are VAT-exempt, you cannot reclaim your VAT for these purchases. VAT-exempt items can include insurance, educational provisions, credit products and subscriptions.
Business entertainment costs
If you’ve been hosting a party or entertaining clients, you can’t reclaim the VAT on these expenses. You cannot claim back VAT on the costs of entertaining anyone that’s not an employee.
When can VAT be reclaimed?
Unless a purchase is VAT exempt for being a business entertainment cost or a material for creating a VAT-exempt product, it is very likely that you will be able to reclaim the VAT.
You can reclaim VAT on:
This covers everything that you’ve purchased for your business like equipment, office supplies and fittings and furnishings. You can even reclaim for purchases made up to four years before you registered for VAT.
You can reclaim for services such as accounting and legal support. You can also claim for any services you paid for in the six months before your business became VAT registered.
Vehicles and Travel
You can claim back VAT for any business-related travel costs. This will include fuel or public transport.
You can also claim back VAT for any vehicles just for business use. These can include cars and vans, as well as vehicles bought for use as taxis. The vehicle must be solely for the business, not used for any personal travel.
VAT can be reclaimed for business travel costs, like accommodation and food. You can also reclaim VAT on tickets to events like conferences and trade shows.
Receipts for VAT claims
Always make sure you have a VAT receipt for any business purchase you make. Invoices should have a VAT number where one is applicable. If you spent less than £250, you may still be able to reclaim VAT even if it’s not listed on receipts.
Where you don’t have a VAT receipt or invoice, always make sure that you have proof of purchase that you can submit with your claim. In the event that you don’t have a receipt of any kind, a highlighted bank statement could work in its place.
Complete a VAT Return every quarter to claim back the VAT you’re entitled to. You’ll need to work out how much VAT your business paid and how much VAT it spent. If you paid more VAT than came into your business, you can reclaim the difference. If more VAT came in than went out of your business, you’ll owe the difference to HMRC.
Once you’ve filled in your VAT Return, any refund should be processed automatically and paid back within 14 days.