To claim back input VAT, a VAT invoice must be held
Special rules apply to fuel for cars
- If a car is used exclusively for business purposes, you can reclaim input VAT on fuel in the normal way.
- Otherwise, you can opt either to reclaim VAT only on fuel used for business purposes, or to reclaim all the VAT and pay a ‘fuel scale charge’.
Input VAT is not reclaimable on any non-business purchase
- VAT cannot generally be claimed on company car purchases and is 50% blocked on car leasing costs, unless the car is exclusively for business use.
Special rules apply if a business makes exempt supplies
- If a business makes only exempt supplies, it cannot register for VAT and cannot reclaim input VAT.
- If both exempt and VATable supplies are made, the business is ‘partially-exempt’. It can register for VAT and recover part of the input tax incurred.
A business run from home should be able to reclaim a proportion of VAT on some costs
- For example, VAT on business-related phone calls.
The VAT treatment of imports depends on the supplier’s country
- Purchases from suppliers based outside the EU generally attract an import VAT charge at the same rate as if bought in the UK. This can be reclaimed as input VAT provided correct documentation is held. Any import duty paid cannot be reclaimed.
- Purchases from suppliers in other EU countries can usually be made without paying VAT when the goods enter the UK. Instead, the VAT due is declared as ‘acquisition tax’ on your VAT return – but also normally reclaimed as input tax on the same return.