VAT Rebate Claims
If you are self employed and are not already VAT registered you could be owed a VAT rebate through the VAT flat rate scheme.
A VAT rebate can be claimed on assets bought for your business within the last four years.
Joining the VAT flat rate scheme can also help you pay less VAT in the future meaning you can keep more money in your business.
Am I eligible for a VAT rebate?
You are eligible if you are:
- Self employed.
- Limited company contractor.
- Have a turnover below £150,000.
- Pay VAT on goods and services bought for your business.
- Have VAT receipts showing what you have bought.
What is VAT?
If your turnover hits £83,000, then you are legally obliged to register to pay VAT by the end of the following month – usually charged at 20%. Some goods and services are ‘VAT exempt’, 0%, and some are charged at 5% VAT.
What is the VAT flat rate scheme?
The VAT flat rate scheme was set up by the government over ten years ago. It allows for a business to pay VAT at a lower rate meaning you get to keep the difference between what VAT you have paid and what the VAT flat rate scheme allows.
VAT flat rate scheme 1% bonus
In the first year of being part of the VAT FRS you get an extra 1% off your flat rate which will increase what you are owed back.
What can I claim for as part of a VAT rebate?
Under the VAT flat rate scheme you can claim for assets worth £2000 including VAT or more.
If you have not been registered for VAT before you can claim back for allowable assets bought within the last four years in your first VAT return (even if they are worth less than £2000 including VAT).
Being in the FRS means you don’t reclaim VAT on your purchases. The only exception is if you purchase an an asset which is worth £2000 or more.
The scheme aims to keep things simple with the difference between the standard rate of VAT and flat rate for your industry being claimed.
If there is personal and business dual purpose to the item, then you can claim the percentage that is proportional to its business usage.
For example, if you use a vehicle for work 60% of the time and personal usage the other 40%, then you can claim 60% of the VAT. Business owners are not always aware that it is also possible to make a VAT claim for fuel and business vehicles; new, leased, commercial and self-drive hire.
My turnover isn’t high enough to be VAT registered
You have to become VAT registered if your turnover hits £83,000. If your turnover is below the threshold you can voluntarily register for VAT meaning you can take advantage of the VAT flat rate scheme.
For example, the Flat Rate VAT Scheme allows a business to continue to charge VAT at 20%, but pay VAT at a lower rate (there are variable rates, depending on the type of business). So, you pay less VAT than you charge and keep the difference in your business.
What things are not included in a VAT rebate claim?
There are several things that you cannot claim for, for example: items purchased from other EU countries, items that are solely for private use and ‘business entertainment’ expenses.
This is not an exhaustive list and it is important that any claims are checked for accuracy before submission.
What records do I need to make a VAT rebate claim?
You need to keep clear, organised records of all sales and purchases, copies of VAT invoices and receipts – amongst other things.
You also need to have a VAT account. HMRC are entitled to inspect any business at any time and, if your record keeping is not up to scratch, there are considerable penalties to be paid.
You then use your business information to submit a VAT rebate claim as part of your VAT return.
Anything else?
A VAT rebate is classed as taxable profit, as additional income. This means you need to pay tax on the difference between the VAT charged and the VAT paid over to HMRC. You need to declare this figure on your tax return and pay tax on it.
Further information:
