When you are completing your VAT return and claiming back
VAT you have paid on purchases, it should be a simple job that is easily
completed. But it is also easy to get things wrong without even knowing. Some
of the rules are complicated and unfortunately, ignorance is no defence if HMRC
pick up your mistakes. They can, and will, impose heavy penalties.
Rules not
Widely Known
Did you reclaim the VAT on your company car when you bought
it? If you use it to ferry the kids to school on your way to the office, and
pick up the groceries on the way home, that means it is partly for private use.
Even the commute to work is private use. Only the VAT on cars used solely for
business purposes, insured as such and kept at the business premises, is
reclaimable.
On the other hand, you can reclaim the VAT if you buy mobile
devices for your staff. If they are then used for personal reasons as well as
business use, you can only reclaim the VAT element of the cost of the business
use. However, if you make a nominal regular charge to the staff member who has
an iPad or laptop, you are technically leasing it, which is business use, so
all the VAT can be reclaimed.
Of course, you keep all your bills for the requisite number
of years. Have you ever received an invoice that didn’t show the VAT
separately? Did you check whether the items purchased were VAT-able, and at
what rate? If 20% VAT was due, how did you calculate the amount that you could
claim back? You should have multiplied it by a sixth to come to the figure that
HMRC will accept.
When Can
you Reclaim VAT on Entertaining Costs
If you want to treat your loyal customers, or host a
networking meeting, this is classed as entertaining third parties, for which
VAT is not reclaimable. If some of your staff also attend, you may be able to
reclaim a proportion of the VAT. Treating your staff to a summer outing or a
Christmas party is a different matter. Staff entertainment is eligible to be
added to your VAT return in the claiming section.
The government website has a whole section on VAT. To find
out more about the rules on reclaiming, go to this page and
follow the relevant links. Your local bookkeepers will also be a mine of
information on VAT matters, so you would be wise to discuss any concerns you
have with them.
