Deductible VAT - What is deductible VAT?

Deductible VAT refers to expenses for business purposes that you can claim all (or a portion) of the VAT back. Examples include mobile phones, computers or your home office.

If the purchase is purely for your business, then you can claim back all of the VAT. If it’s a mixture of both business and private use, then you can claim the business portion of the VAT. 

For example, if you use your mobile phone 50% of the time for business purposes and 50% for personal use, then you can claim 50% of the purchase price and monthly bill.

When is deductible VAT necessary?

Deductible VAT is necessary when it’s 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 on the internet about what is and isn't deductible in the way of VAT. However, the HMRC 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 to claim something that isn’t eligible.

Special regulations for deducting (reclaiming) VAT

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

  • A computer or computer equipment costing £50,000 or more before VAT

  • Ships, boats and aircrafts 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 is possible, include:

  • Fuel

  • Hiring transport

  • Travel expenses (e.g. train fares)

  • Accommodation

  • 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. 

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.

You can reclaim the VAT by submitting your VAT Return.