An Introduction to VAT

May 10, 2018

 

We regularly receive queries from clients around the differing VAT categories and how to account for specific VAT related transactions. Because of this, we’ve put together this guide to help with the basics.

 

 

Categories of VAT

 

* Input VAT recovery on purchases is dependent on which VAT category the related supplies (sales) of the entity fall into

 

 

Exports/Imports

  • Goods exported outside the EU or sent to someone registered in another EU country are zero-rated

  • Goods exported to someone not registered in another EU country are charged in the normal way

  • Import VAT charged on goods from outside the EU can be reclaimed assuming a HMRC C79 form has been received

  • Import Duty cannot be reclaimed

 

Vehicles & Fuel

  • Full 20% can be reclaimed on vehicle leases if used 100% for business use

  • Reduced rate of 10% can be reclaimed if vehicle is leased and there is an element of private use

  • As a general rule you cannot recover VAT on the purchase of a car

  • VAT on purchase of commercial vehicle (vans, taxi, 100% business use car) can be reclaimed

  • VAT on fuel used 100% for business use can be reclaimed

  • VAT on mileage can be reclaimed but only for the element that relates to fuel (see HMRC guidance for detailed calculations)

 

 

Entertaining/Subsistence

  • VAT on client entertainment is not recoverable

  • VAT on staff entertainment can be reclaimed where it is wholly for business purposes

  • Business related subsistence (food and drink when working away) is recoverable

 

 

Workwear & Clothes

  • Generally VAT cannot be reclaimed on clothing, even if a high standard of dress is required for business reasons

  • VAT on protective clothing and uniforms can be recovered

 

This is just an introduction to VAT and the rules can be fairly complex in certain areas. Therefore, if you have a query around anything that is not covered above, then do not hesitate to contact a member of the team for further guidance.

 

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© 2016 Sterling Accounting Solutions Limited is a company registered in England and Wales under number 07787772. Sterling Accounting Solutions Limited is a member of the Institute of Chartered Accountants in England and Wales Practice Assurance Scheme under registration number C004248247.