If you own a business, you can recover VAT on the costs of running your company. Prestige Tax and Trust services explains when you can reclaim VAT.
When you can claim
You’re legally required to register for VAT (Value Added Tax) if your VAT taxable turnover exceeds £82,000. However the government usually allows you to reclaim VAT on goods and services purchased for use in your business.
We should note that if the good/service is for private use as well as business use, you can only reclaim the business proportion of the VAT. For example if you run your company from home and your office takes up 20% of floor space, you can reclaim 20% of the VAT on your utility expenditure.
But there are special rules for reclaiming VAT on particularly expensive assets. In these cases you might need to adjust the amount of VAT you reclaim over several years, via the Capital Goods Scheme. This applies to:
- Land/buildings that cost at least £250,000 before VAT.
- Boats, ships or aircraft that cost at least £50,000 before VAT.
- Individual computers and single pieces of computer equipment that cost at least £50,000 before VAT.
When you can’t claim
There are a range of costs, however, that you can’t reclaim VAT on. This includes:
- Anything that you buy for personal use only.
- Business entertainment costs.
- Business assets that are transferred to you as a going concern.
- The goods you buy which are sold under a VAT second-hand margin scheme.
- Anything you buy from a member-nation of the EU. However, you can sometimes reclaim any VAT charged under the electronic-cross border refund system.
- Services and goods your firm utilises to make VAT-exempt supplies.
The goods/services you bought before you registered for VAT don’t necessary fall into this category. You can reclaim VAT on these purchases if they were executed within certain time limits. Furthermore, you’re required to conduct separate calculations to reclaim VAT on purchases that relate to both VAT-exempt and taxable supplies, such as accountancy fees and phone bills.
Prestige Tax and Trust Services
Reclaiming VAT is just one of the things you should do to protect your business. You might also want to write a will that maximises tax relief for the people who inherit your company. Prestige Tax and Trust Services provides the business protection service you need to safeguard your firm for future generations when you pass away.