Purchases for both business and private use: reclaiming VAT

An area of VAT that seems to cause a lot of confusion is understanding reclaiming VAT for purchase used for both business and private use. Its worth looking at HMRC’s advice on this.

HMRC say “You may use some of the goods and services that you buy for your business for both business and non-business use. You can generally only reclaim VAT on the proportion of these items used for business purposes. For example if you buy a computer and use it 50 per cent for your business and 50 per cent for private use, you can only reclaim 50 per cent of the VAT. Normally you would simply reclaim that proportion of VAT on your VAT return. In some very limited situations you can reclaim all the VAT and then pay back the proportion of VAT used for non-business purposes. The rules that apply to motoring expenses and road fuel are different.

This guide will show you how to calculate the business use proportion of an item and how to reclaim that proportion of VAT.”

http://www.hmrc.gov.uk/vat/managing/reclaiming/private-use.htm

Eamon McNicholas
Tax Barrister, Accountant
EamonMcNicholas.com

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About Eamon McNicholas

Tax Barrister, Accountant www.EamonMcNicholas.com
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