Debitoor Dictionary

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  1. VAT
  2. VAT return

Deductible VAT - what is deductible VAT?

Deductible VAT, put simply, are expenses for business purposes that you can claim all (or a portion) VAT back from. Examples included mobile phones, computers, or your home office.

Keep track of expenses that have deductible VAT with ease using Debitoor - try for free with a 7 day trial.

If the purchase is purely for your business, then you can claim all VAT, but if it is a mixture of business and private use e.g. 50-50 (such as a mobile phone), then you can claim 50% of the purchase price and monthly bill.

When is deductible VAT necessary?

Deductible VAT is necessary when it is a product or service that can be written off with business use. As an example, if you have a laptop that you purchased for both business and personal use (70% business, 30% personal), then you can reclaim 70% of the purchase price.

When do I know that the VAT on an expense is deductible?

There's lots of information knocking around on the internet about what is and isn't deductible in the way of VAT- however, the Gov UK website gives an overview of the different scenarios under which a deduction can be reclaimed. As always, the best person to ask would be your accountant as they would be able to guide you through the process of claiming a VAT deduction. This way you'll know for sure, and won't accidentally try and claim something that it isn't possible to deduct for.

Special regulations for deducting (reclaiming) VAT

There are a few scenarios where it is not possible to reclaim VAT on a purchase in one go. These are:

  • A computer or individual computer equipment costing £50,000 or more before VAT
  • Ships, boats, and aircraft costing £50,000 or more before VAT
  • Property or land costing £250,000 or more before VAT.

For cases like these, VAT is reclaimed over a longer period of time under the Capital Goods Scheme

Other situations where VAT is deductible

Other scenarios where claiming back VAT are possible are:

  • Fuel
  • Hiring transport
  • Travel expenses (e.g. train fares)
  • Accomodation
  • Food and drink

How do I make a claim for deductible VAT?

The rules governing deductible VAT are fairly strict, and the claim must be made within a specific timeframe.

This refund period cannot be for more than one calendar year, or less than 3 calendar months unless it covers the rest of a calendar year before the next. If these criteria are met, then the amount reclaimed cannot be less than £295. If the application is for a whole year, or the remainder of a calendar year, then the claim cannot be for less than £35.

Applications must be completed by the 30th of September the following year for the last previous calendar year.

How do I create an expense with deductible VAT in Debitoor?

This process has to be completed in two steps. Any expenses (regardless of whether they are VAT deductible or not) are filed within the “Expenses” tab.This is because whilst it is being processed, you do not know for definite that your VAT reclaim will be accepted. Once you have received your re-claimed amount, you can list it as a VAT deduction under “Other income” within the “Invoices” tab.