What items can I reclaim VAT on?

You can usually reclaim the VAT paid on goods and services purchased for use in your business.

If a purchase is also for personal or private use, you can only reclaim the business proportion of the VAT.

You must have a copy of the VAT receipt to reclaim the VAT.

There are some typical business costs that are either VAT exempt or zero-rated. This means you will not have been charged VAT, and therefore you cannot claim it back. These should be included in your net purchases figure on your VAT return.

Typical examples of this include:

• Exempt Expenses:
  • Insurance
  • Postage
  • Loan and Finance costs – including bank charges
  • Subscriptions to professional bodies
• Zero-rated expenses:
  • Water rates
  • Books
  • Public transport including train travel and flights

There are also some business costs that are ‘outside the scope of VAT’. This means that VAT doesn’t apply to them at all. These costs should not be included on your VAT return.

Examples of these include:

• Wages and Salary payments
• Payments to Subcontractors
• Loan and hire purchase payments
• Council tax and business rates
• MOT tests
• Road tax
• Drawings

Certain business costs have specific rules in regard to VAT:

• Entertaining:
  • Staff Entertaining:
    • Only employees – VAT can be reclaimed
    • Only Directors or partners of a business – VAT cannot be reclaimed (If directors or partners are in attendance for entertaining of other employees then the VAT can be reclaimed)
    • Mixture of employees and non-employees (for example if employees partners attend) – You can only reclaim the VAT on the portion of the costs that are for entertaining staff.
  • Client or other business entertaining – VAT cannot be reclaimed
• Vehicle Costs:
  • Purchasing a new car:
    • VAT cannot usually be reclaimed on the cost of a new car unless it is used entirely for business purposes with no personal use (travel from home to work is classed as private use)
  • Leasing a car:
    • You can usually reclaim 50% of the VAT on a car lease.
    • You can claim all of the VAT if you use the car entirely for business purposes with no personal use
  • Buying a commercial vehicle:
    • You can usually claim the VAT on a commercial vehicle if it is used entirely for business.
  • Fuel – There are 3 options for how to reclaim the VAT on fuel costs:
    • Reclaim VAT on all fuel costs and pay a fuel scale charge
    • Only reclaim the VAT on the fuel you use for business trips
    • Don’t claim any VAT on your fuel costs
  • Additional costs:
    • Repairs and Maintenance – VAT can usually be claimed
    • Motor Insurance – Exempt expense
    • Road tax and MOT – Outside the scope of VAT

If you need any advice or would like our help in completing your VAT returns, please get in touch.