Whatever the tax, planning and financial management are vital to ensure you are not making overpayments.
VAT is no exception. Moreover, it changes regularly, which can have a huge impact on both businesses and consumers.
It is important to make sure you understand the rules so you can make the most of tax planning to fulfil your liabilities while minimising your tax bill.
If you are running your own business, one important rule to get to grips with is the circumstances of when you can claim a VAT refund.
This can potentially recoup significant funds for your business, so should not be overlooked.
What is the current VAT rate?
The standard VAT rate in the UK currently stands at 20 per cent.
What can I reclaim VAT for?
Businesses can reclaim the VAT paid on goods and services purchased for use within the business.
If a purchase was used for a proportion of business use, then only the business proportion of VAT can be reclaimed.
For example, if you work from home and a certain percentage of your floor space is used for business use, you can claim that percentage of VAT back from your utility bills.
What can I not reclaim VAT for?
Businesses cannot reclaim VAT on anything that is used only for private use and business entertainment costs.
VAT can also not be reclaimed on goods and services used to make VAT-exempt supplies; goods sold to you under a VAT second-hand margin scheme and business assets that were transferred to you as a going concern.
How to reclaim VAT
It is vital that you keep records for any claims you make, particularly to show how you calculated the business proportion of a purchase. Make sure you have complete VAT notices.
Making Tax Digital VAT rules must be followed. If you have not done so already, start keeping digital records before signing up to Making Tax Digital for VAT.
Need help with VAT payments and reclaims? We offer a range of VAT consultancy services. Don’t hesitate to get in touch with our team today.
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