One of the most common questions that our clients ask us is What VAT can I claim back to reduce my VAT liability?
Firstly, we always advise our clients that VAT charged by them is not their money, so park it, open a VAT account and lodge it. Do not lean on VAT as a source of credit to mask issues of profitability.
The following is a list of costs (not exhaustive) on which you can generally claim VAT:
- The stock that you purchase for resale, where there is VAT charged on the invoice you will be able to reclaim same.
- VAT incurred on costs incurred wholly and exclusively for the purpose of your trade such as accountancy fees, light and heat, repairs, rent (where VAT is charged by the landlord), equipment, stationery, advertising and marketing, computer running costs….….you get the idea.
- 20% of the VAT incurred on the purchase or hiring of a passenger motor vehicle (there is a 60% business usage requirement).
In order to claim any VAT deduction you MUST have a valid VAT invoice.
The following is a list of items for which no trader can reclaim VAT:
- Expenditure on food or drink (unless you are in the business of selling food and drink).
- Expenditure on accommodation (specific exception applies to a qualifying conference).
- Entertainment expenses.
- Petrol (unless you are in the business of buying and selling it), take note that traders may take a deduction for VAT incurred on diesel.