As a VAT-registered trader you can reclaim VAT you incur on goods and services to be used for the purpose of making business sales which are subject to VAT. Goods or services used for non-business activities, or for generating VAT -exempt sales, can’t be included in a VAT claim, unless the partial exemption rules apply.
HMRC are increasingly questioning whether costly purchases are used for a purpose that generates VATable sales and thus whether the VAT can be reclaimed.
Recently they have attempted to block the repayment of VAT paid on assets acquired before the VAT registration date. VAT can be reclaimed if the asset was acquired within four years of, and is still in use at, the VAT registration date.
HMRC may also attempt to block VAT paid on the acquisition of rights, such as entitlements under the single farm payment scheme or farm basic payment scheme. Such rights are part of the overheads of a farming business and a legitimate business expense on which VAT can be reclaimed.
If HMRC challenge your claim for VAT repayment, we can help argue your case.