Most people are aware that foreigners can reclaim Value Added Tax (VAT) on purchased items that they intend to carry out of the EU territory. What many business owners don’t know, however, is that they can also reclaim VAT on the goods and services that they sell. This is usually for new owners of small and medium size businesses.
Even those that know about it often avoid trying to reclaim the VAT for fear of government bureaucracy. The hard part of the process, however, is keeping accurate VAT records.
You can reduce the hustle by investing in quality VAT technology for your business. The technology helps you keep track of the reclaimable VAT data efficiently and accurately. This makes your interaction with the government much easier and faster.
Do you qualify for reclaimable VAT?
For you to qualify for a VAT refund, you must first be selling goods or offering services that attract VAT. There are three categories of VAT i.e. standard, reduced and zero-rated. If the goods you supply are VAT exempt you cannot get a refund.
Your business must also be duly registered for VAT with the HMRC. Note that registration for VAT is mandatory for businesses that have attained the VAT turnover threshold (currently £85,000).
Once you register, you will be submitting your business’s VAT returns every three months.
You can also only reclaim VAT of your business’s supplier is registered for VAT. You must therefore vet your suppliers to ensure they are registered for VAT if you wish to claim reclaimable VAT.
What you can, or can't, claim VAT refund on
You can’t claim VAT refund on everything that you use on your business. You must have the records to show that the items were bought and use for business purposes only. This is why you need a system that keeps accurate and verifiable data.
For items that are used for both business and personal purposes, you may need to show what portion of the item was used for each and how you came to that figure. You will then only be able to VAT on that portion that was used for business.
Generally, the items that you can't claim VAT refund are:
- Items for personal, non-business use
- Expenses on items used to attract or entertain clients
- Car purchase – except in special situations
- VAT exempt items
- Items supplied by a company not registered for VAT
- Log into the HMRC site and submit your VAT return online; you required by law to do so every three months
- Claim the VAT as guided on the site
- You will be required to give your account details
- If your returns are in order the refunded amount will be sent within a week or two
Normally, the process of getting your reclaimable VAT is easy and straightforward. This, however, is only possible if you have good knowledge of the relevant laws, and your business expenses.
If you are not adept on these, it is advisable to get assistance from someone who does. The use of VAT technology also goes a long way in making the process smooth.