If you’re wondering what you can claim back on a VAT return, you’re not alone. Understanding VAT (Value Added Tax) can be complex, but knowing what you can reclaim can save your business money. Essentially, you can claim back VAT on goods and services purchased for business use, provided you have valid VAT invoices. Let’s explore this in more detail.
What Can You Claim Back on a VAT Return?
When it comes to reclaiming VAT, the primary focus is on business-related expenses. Here’s a breakdown of what you can typically claim:
- Goods and Services for Business Use: If you purchase goods or services solely for business purposes, you can reclaim the VAT. This includes office supplies, equipment, and professional services.
- Stock and Raw Materials: VAT on items bought to produce goods or services for sale is reclaimable.
- Travel and Subsistence: Business-related travel expenses, such as hotel stays and meals, can also be claimed.
- Fuel and Vehicle Costs: If vehicles are used for business, VAT on fuel and maintenance can be reclaimed, though there are specific rules regarding personal use.
- Utilities and Rent: VAT on business premises utilities and rent is reclaimable if your landlord charges VAT.
Can You Claim VAT on Entertainment Expenses?
Generally, VAT on entertainment costs is not reclaimable. However, there are exceptions for staff entertainment, such as a Christmas party, where VAT can be claimed back.
How to Ensure You Can Reclaim VAT
To successfully reclaim VAT, it’s crucial to maintain accurate records and follow the necessary protocols:
- Keep Valid VAT Invoices: Ensure you have valid VAT invoices for all purchases. These invoices should include the supplier’s VAT number, the amount of VAT charged, and a description of the goods or services.
- Use VAT Accounting Software: Implementing accounting software can streamline the process of tracking VAT on purchases and sales.
- Understand Partial Exemption: If your business sells both VAT-exempt and VAT-taxable goods or services, you may need to apply partial exemption rules.
What Is a VAT Return?
A VAT return is a form you submit to HMRC, typically every quarter, detailing the VAT you’ve charged on sales and the VAT you’ve paid on purchases. The difference between these amounts determines whether you owe money to HMRC or can reclaim VAT.
| Feature | Option A: Fully Taxable Business | Option B: Partially Exempt Business |
|---|---|---|
| VAT on Purchases | Fully reclaimable | Partially reclaimable |
| Record Keeping | Standard VAT invoices | Detailed records for partial claims |
| Complexity | Moderate | High |
Common Mistakes to Avoid
- Not Keeping Receipts: Always keep receipts and invoices to substantiate your claims.
- Claiming VAT on Non-Business Purchases: Ensure all claimed VAT is for genuine business expenses.
- Ignoring Partial Exemption Rules: If applicable, understand and apply partial exemption rules to avoid penalties.
People Also Ask
What is the deadline for submitting a VAT return?
VAT returns are typically due one month and seven days after the end of your VAT accounting period. For example, if your accounting period ends on March 31, your VAT return is due by May 7.
Can you claim VAT on second-hand goods?
Yes, you can claim VAT on second-hand goods if the seller is VAT-registered and provides a valid VAT invoice. However, specific rules apply under the Margin Scheme.
How does VAT affect small businesses?
For small businesses, being VAT-registered can mean charging VAT on sales and reclaiming VAT on purchases. It can impact cash flow and pricing strategies, so it’s essential to understand the implications.
What records do you need to keep for VAT?
You need to keep records of all sales and purchases, VAT invoices, and any other relevant documents for at least six years. These records are crucial for accurate VAT returns and audits.
Can you reclaim VAT on international purchases?
Reclaiming VAT on international purchases depends on the country and whether the purchase was for business use. You may need to use specific schemes like the EU VAT refund scheme.
Conclusion
Understanding what you can claim back on a VAT return is vital for managing your business finances effectively. By ensuring you have valid VAT invoices and maintaining accurate records, you can maximize your VAT reclaims and avoid common pitfalls. For more detailed guidance, consider consulting with a VAT specialist or accountant.
For further reading on related topics, explore our articles on "How to Register for VAT" and "Understanding VAT Partial Exemption Rules." Stay informed and keep your business compliant with VAT regulations.
