You can claim back VAT on most goods and services you purchase. The main condition is that these purchases must be for use in the running of your business.
So if you buy a laptop that’s used every day to run the online elements of your business, the VAT on that purchase can be reclaimed. If you buy a laptop for gaming in your leisure time, where it’s for personal use, you can’t claim back the VAT.
Purchases you can’t claim VAT on
Current guidance from HM Revenue & Customs (HMRC) states that you can’t claim VAT on:
- Anything that’s only for private use
- Goods and services your business uses to make VAT-exempt supplies
- Business entertainment costs
- Anything you’ve bought from other EU countries (you may be able to reclaim VAT charged under the electronic cross-border refund system)
- Goods sold to you under one of the VAT second-hand margin schemes
- Business assets that are transferred to you as a going concern
Rules of thumb for your main business expenses
What you can and can’t claim back the VAT on can become complicated, depending on what you've purchased, whether you have employees and whether you’re a director.
As a general rule of thumb, this is how claiming VAT works with the most common expenses.
- Travel – it’s rare that you’ll be able to claim the VAT on your own personal travel.
- Most public transport is zero-rated, so there’s no VAT to reclaim.
- You can claim the VAT back on travel costs incurred by your employees if the travel was for business purposes.
- Fuel and motor vehicle costs – you can claim some of your vehicle costs, including:
- Servicing and maintenance of your commercial vehicles
- The cost of buying some commercial vehicles if they’re used purely for business purposes.
- Fuel costs by paying the fuel scale surcharge – find out more about this here
- Subsistence – you can claim for general costs, like food, drink and accommodation etc.
- These costs must have been incurred for business use – for example, staff going on a training day, where a hotel, lunch and dinner was needed.
- You can only claim back VAT on hot food that’s been purchased, not on cold food, such as sandwiches.
- Gifts – you can claim back the VAT on any gifts, as long as the overall cost doesn’t go above £50.
- For micro and small businesses, it’s rarely work making the claim, given the work involved for such a small return.
- Entertainment – you can claim back the costs of hospitality and entertainment.
- The hospitality/entertainment must only be provided for your own staff.
- If anyone who’s not an employee is provided for, you can’t claim the VAT back.
The rules and regulation around expenses are complicated, so it’s worth talking to a specialist tax expert to check what you can and can’t claim.
If you’re unsure which expenses you can claim, get in touch and we’ll talk you through the options. Give us a call on 01454 300 999, or drop an email to email@example.com