Value Added Tax (VAT) can be difficult to understand, but the process doesn’t have to be daunting. Understanding the basics and following the right procedures can ensure that you receive what you’re entitled to.
So, how exactly do you claim VAT back? What can you reclaim VAT on? And who is eligible to claim VAT back? That’s what we’ll be exploring today. Read on to learn more about Value Added Tax, and how you can get a VAT refund.
What is VAT?
Value Added Tax is a consumption tax that is added to most goods and services sold by VAT-registered businesses. If your VAT is taxable, you need to register for VAT. This tax is levied on products and services at each stage of production and distribution.
Ultimately, it is paid by the end consumer – but collected by businesses and forwarded to the government.
VAT is a huge source of revenue for HM Revenue and Customs (HMRC) in the UK and is currently set at different rates for different types of goods and services.
Am I Eligible to Claim VAT Back?
First of all, you must be a VAT-registered business (registered for VAT) to claim VAT back. This means that your business turnover has exceeded the VAT threshold, which is currently £85,000 in the UK.
Your VAT-taxable turnover is the combined value of all goods/ services you sell that are not VAT-exempt.
Once registered, you can reclaim VAT on goods and services that you’ve purchased for your business activities.
What Can I Reclaim VAT On?
Now you understand the eligibility for reclaiming VAT, let’s determine what you can reclaim VAT on. First of all, you can only claim VAT on goods and services used exclusively for your business. This means you can reclaim VAT on business expenses such as:
- Office supplies
- Equipment
- Utilities
- Business-related travel expenses
However, it’s important to note that you cannot reclaim the VAT on purchases that are used for personal use or that are specifically exempt from VAT.
For example, if you buy a mobile phone for both personal and business use, you can only reclaim VAT on the portion used for business purposes. Likewise, certain goods and services, such as financial and insurance services, are exempt from VAT, so you cannot reclaim the VAT paid on these items.
How to Complete a VAT Return
When completing a VAT return, you’ll need to calculate the VAT that you have charged on sales. This is known as the output tax. You’ll then need to subtract the VAT you’ve paid on purchases – the input tax. The final figure is what you owe HMRC – or what they owe you in a VAT refund.
The key is to keep accurate VAT records, including valid VAT invoices for purchases and sales to support your claim. These invoices must show the VAT separately, along with the supplier’s VAT registration number.
fWhen you have calculated the VAT liability or refund, you will submit the VAT return to HMRC. This is typically every three months. You can submit a return online through the HMRC website, or use accounting software to do so.
How Can Accountants Help Me Reclaim VAT?
Understanding the ins and outs of VAT can be time-consuming and overwhelming. This is where accountants come in – our helpful team of expert accountants at LJS Accounting Services can help you reclaim the VAT you’re entitled to.
We help businesses from various sectors manage their finances efficiently, from construction companies and manufacturing businesses to hospitality and events organisations.
With our expertise, we can ensure that your VAT returns are accurate and submitted on time, helping you avoid VAT penalties and maximise your VAT refunds.
We can help you by:
- Advising on VAT registration and compliance
- Reviewing your business expenses to identify opportunities for VAT reclaims
- Ensuring that your VAT records are complete and compliant with HMRC regulations
- Handling the preparation and submission of your VAT returns, taking the stress out of the process for you
Trust our experts to provide peace of mind knowing that your VAT affairs are in capable hands. We can give you the time to focus on growing your business without having to worry about VAT returns.
Keli Evans, Director at LJS Accounting Services, excels in taxation and statutory accounts. With a focus on strong client relationships, she leads a diverse portfolio, overseeing vital financial aspects like VAT, payroll, pensions, and taxation with a holistic and committed approach.
