Deductible VAT
What is Deductible VAT?
A deductible VAT is any business expense incurred for business use that you can reclaim (either in full or a fraction of the VAT). Some common examples could be Internet or data bills, mobile phones, accommodation, meals, transport hires, fuel, travel costs, computers or laptops, or home office items.
How is Deductible VAT calculated?
The ratio of business to personal use determines whether a purchase can be claimed in full or in part. So, if you purchase a laptop purely (100%) for business purposes, you reclaim the full VAT (Value-Added Tax). Contrastingly, if you bought a mobile phone 50% for personal use and the other 50% for business, you can only reclaim 50% of the purchase price and monthly bill.
What are some examples of Non-Deductible VAT?
An online search can tell you many things about what VAT can be deductible and what can’t; hence, ensuring you have a reliable source, the HMRC website itself is vital. If you are unsure and want complete confidence, it is best to consult your business accountant to help you determine and make proper deductible VAT claims.
Please note that there are strict regulations that you must follow as a guideline where deductible VAT claims are NOT possible, which include:
- Any computer or computer equipment that costs £50,000 + pre-VAT.
- Any boats, ships, and aircraft that cost £50,000 + pre-VAT.
- Land or property that costs £250,000 or more pre-VAT
These are exceptional cases where VATs may be reclaimed over an extended time following the Capital Goods Scheme.
What are Deductible VAT claim rules?
To make claims for deductible VAT, you must ensure you meet the following criteria:
- The refund cannot exceed one calendar year or be less than three calendar months (unless it covers the remaining calendar year)
- The amount reclaimed must be more than £295
- For whole-year applications, your claim cannot be less than £35.