VAT recovery on business expenses
VAT recovery on business expenses
Q: Can you tell me which business expenses I can't claim back VAT on?
A: Below are some common business expense claims where VAT input tax recovery is prohibited or restricted:
Cars:
You cannot reclaim VAT added to the purchase price unless the car is used to directly create income for the business, such as taxis, self-drive hire cards or cars for driving instruction.
Cars leasing:
Reclaiming VAT added to car lease rentals is typically rectricted to 50%.
Car fuel:
If employers meet employees' private fuel costs they will have to pay a VAT car scale charge based on the car's CO2 emissions.
Car parking:
Although you can reclaim VAT on car parking charges for genuine business purposes, not all car parks charge VAT. On-street parking meters do not add VAT to their charges.
Business entertainment:
VAT can't be reclaimed on entertaining UK customers and non-UK business contacts if they are not customers. NB. a recent change in EU legislation means that it is now possible to recover VAT when entertaining non-UK customers.
Subsistence:
Although the VAT included in subsistence paid to employees can be recovered, the input tax added to the subsistence paid to contract workers (who are not employed by the company) can't be reclaimed.
Business events:
When a business organises an event or party that is also attended by directors and employees acting as hosts, the entire VAT on the cost is irrecoverable. None of the cost can be attributed to staff subsistence.
Business gifts:
VAT can only be reclaimed if the total value of gifts received in a year does not exceed £50.
Mobile phones:
Where businesses allow private calls to be made at no charge, the VAT recovery must be apportioned on a fair and reasonable basis. Where employees pay for the private use of their phones, the business can reclaim the input tax in full provided an output tax charge is accounted for in respect of private use.