What can I reclaim VAT on?

Building Momentum in your business isn’t always about the big things.  Sometimes it is about the little things.  The little, yet complicated things.

The UK’s VAT system is a complicated system and to be honest, that is an understatement.  But rather than get bogged down in how complicated the system is, let us try and look at it from a simple perspective and answer the question – what can you reclaim VAT on?

As a business, you can, depending on your set up, claim back the VAT you have paid on goods and services that have been purchased for business use and which you have a valid VAT receipt for. But to be very clear; if you don’t have a VAT receipt, you cannot claim the VAT back. You have to have adequate records to support the VAT claim.

What exactly is a VAT receipt?

Your standard VAT receipt includes a name, address and the VAT number of the supplier. It should also have your name and address, the date of the transaction and a description of the goods and/or services you have received.  It will also include the cost of the service/goods before VAT, the VAT cost on its own and the total amount that contains the VAT.

You can be given a shorter VAT receipt that only gives you the sellers name, VAT number and total cost.  With these receipts, it is up to you to calculate the VAT you can reclaim.

What you cannot reclaim VAT for…

Your business can’t reclaim VAT on any of the following:

• insurance
• employee salaries
• PAYE
• postage
• bank interest
• business entertainment (with exceptions for overseas customer entertainment)

Do I have to be registered for VAT?

If your business is not VAT registered then you don’t have to charge VAT to your customers.  Likewise, you cannot claim any VAT back.  Many businesses try to stay under the VAT radar (the current threshold if £85,000)

If you receive an invoice with VAT included but are not VAT registered then you will need to pay the full cost.

The future of VAT

After Brexit, it is expected that VAT rules will change.  VAT is based on a EU system and now that the UK has left the EU, it is expected that things will change.  However the global pandemic and current conflict in Ukraine means that many of these changes are yet to be revealed.