PART 3: WHEN CAN YOU CLAIM VAT BACK?

Updated: Mar 22



WHEN CAN YOU CLAIM VAT BACK?

You can claim VAT back when:


  • you’ve purchased goods or services for your business

  • a customer leaves you with a bad debt



VAT ON BUSINESS EXPENSES:

When you buy something for your business, you’re usually charged VAT. If you’re registered for VAT, you can claim that back. You do this by reporting how much VAT you paid during a period of time. HMRC balances the amount you’ve paid against the VAT you’ve collected to work out your refund or bill (learn more in working out your VAT).


Business expenses include things like stock, work tools, computers, phones, and stationery. You can’t claim VAT on client entertainment.



WHEN EXPENSES ARE SPLIT BETWEEN BUSINESS AND HOME:

If you buy something like a laptop that you use at home and in the business, you can claim part of the VAT back. You will need to work out what portion of the purchase is business-related and show how you arrived at that number.



WHEN YOU’RE NOT COLLECTING ANY VAT:

You can claim back VAT on supplies even if the end product or service that you sell is 0% VAT rated. But you can’t claim VAT back if the end product or service is VAT exempt.



VAT RELIEF ON BAD DEBTS:

If you raise an invoice and pay VAT on the expected income but your customer doesn’t pay you, then you have a bad debt. You can claim back the VAT from HMRC on your next return. If the customer pays later, you can repay the VAT then.



VAT LOAN FUNDING:

Spreading the costs of your VAT costs is a viable option if your business is, for whatever reason, unable to keep up with the quarterly VAT deadlines. It may be that you simply would prefer to spread the payments over a longer period of time. Vat loan funding is also becoming a popular choice for companies who are wanting to improve their cashflow both in the short and long term.


If you would like more information or would like to begin an application towards securing your own loan for your business, then please do not hesitate to get in contact with one of our finance brokers on 01908 429888 or via info@approved-finance.co.uk



 

Reference:


Xero. 2022. How to Register for VAT | VAT Guide | Xero. [online] Available at: <https://www.xero.com/uk/guides/vat/registering-for-vat/> [Accessed 25 January 2022].


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