Smarter accounting

How to reclaim extra VAT

2 December 2017, Advocates, Companies, Creative Industries, Sole Traders

HMRC VAT toolkit

HMRC’s VAT Input Tax Toolkit highlights common errors businesses make when they reclaim VAT on purchases.  As you would expect from an HMRC publication it focuses on situations where you can’t or shouldn’t reclaim VAT.  It doesn’t really point out how to reclaim extra VAT.  This article pointes out a few easy wins to claim VAT and reduce costs.

Reclaim extra VAT with the right paperwork

In order to claim back VAT paid on purchases HMRC expects your company to have a proper invoice or receipt in the name of your business.  However, it concedes that it’s not always possible, particularly in situations where the purchase was impromptu, for example when you or your workers are travelling on business.

Less detailed paperwork

HMRC allows VAT to be reclaimed on purchases of up to £250 as long as you have a receipt or invoice showing the key details, i.e. the name and address of the supplier, nature of the goods supplied, the rate of VAT and the seller’s VAT number.  Typically, this type of receipt is produced by shops and garages.  If the receipt doesn’t break down the cost between the goods or services, work out the VAT you can claim by taking one sixth of the total paid – but you must check that the products you bought are subject to VAT at the standard rate (20%).

No paperwork at all

For certain purchases HMRC allows you to reclaim extra VAT without a receipt or invoice at all.  These must be for £25 or less – this limit is for each item.  The concession applies to the following types of purchase:

  • those made using coin-operated machines
  • for off-road car parking
  • toll charges for tunnels, bridges, etc.; and
  • for phone calls using public pay phones.

Expenses claim

One further condition to reclaiming VAT on expenses incurred by you or your employees is that your business must meet the cost of the purchase, i.e. it must reimburse the person who paid the expense.

Mileage allowances

Where your company pays a mileage allowance to you or your workers for business travel by car, it can reclaim VAT on the part of it that relates to fuel costs.  HMRC publishes a recommended rate per mile according to engine size, or you can use your own mileage rate as long as it’s reasonable.  To reclaim the VAT, you or your workers must provide your company with petrol receipts at least equal to the value of the mileage claim.

More advice

For advice on reclaiming extra VAT and making sure you have the paperwork in place, contact Alterledger using the form below.

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