Reclaiming Value Added Tax (VAT) can be consuming, complex and challenging in process. This means, however, that more than a third of the UK’s small to medium-sized businesses (SMBs) are missing out on significant savings, according to Sage research. In fact, 52 per cent of business owners estimate losing more than £500 every year by not claiming for everything they are entitled to.
VAT is a sales tax that is charged on most goods and services that VAT-registered businesses provide in the UK. It is also charged on goods and some services that are imported from countries outside the EU, and brought into the UK from other EU countries. It accounts for £100bn paid to HMRC every year.
All businesses that turn over more than ?79,000 each year need to be VAT registered. But VAT is constantly evolving, and the rate of change seems to be increasing a key factor why SMBs lack awareness on what goods are tax deductible. Nearly 30 per cent of the 1,000 business owners surveyed suggested that a deeper understanding of VAT would help make their firms more profitable.
So, what can you reclaim VAT on” Generally, you can reclaim VAT that you pay when you buy goods or services for your businesses. This can range from fuel to tea/coffee and biscuits, all of which could save your business hundreds of pounds each year. Just remember to keep all of the required records, such as VAT receipts.
You cannot reclaim VAT paid for goods and services that are used for non-business activities. For example, cars not used exclusively for business and goods and services for non-business use bought by charities or non-profit organisations.
Lee Perkins, Managing director of Sage’s Small Business Division, explains that ?despite being around for 40 years, the ever-changing nature of VAT has put many business owners off from digging into VAT and fully understanding what can be refunded. But it needn’t be a big task, the software exists today that can make claiming money back from HMRC a five minute job. Businesses need to get their VAT sorted now.
The research also revealed that the most popular items to claim money back on were:
- Printer ink;
- Telephone contracts;
- Computers and laptops; and