What VAT can I claim back to reduce my VAT bill?
Do you charge VAT on the sale of goods or services but wondering if you can reclaim the VAT cost incurred on selling those goods and services?
So, what exactly can you claim back on?
If you have been charged VAT for a good or service that has been supplied to your business, you can claim the VAT back on that. You do however need to hold a valid VAT invoice.
VAT is normally charged and accounted for by the supplier of the good or service. However sometimes this may fall on the recipient of the goods and services. This is called reverse-charging VAT. You can, however, claim this back. This would be common in the building trade where there are principal contractors and subcontractors liable to relevant contracts tax (RCT).
For example, a subcontractor (A) carries out work for a principal contractor (B) and the agreed rate for work done is €2,000. A gives B an invoice with no VAT on it and states on the invoice – “VAT on this service is to be accounted for by the principal contractor”.
In this scenario B treats the €2,000 as part of his sales and charges sales VAT at 13.5% (€270) while at the same time he takes an input for the purchase of €2,000 at 13.5% so takes a simultaneous VAT input of €270 so it is a neutral VAT cost for B.
A does not account for the VAT as a sale but can still claim VAT inputs for his business.
In the case of intra-community acquisitions, where goods are dispatched between two businesses in two EU Member States, the VAT responsibility falls on the purchaser. This is a form of reverse charging VAT and must be effectively treated as a sale and as a purchase so it should be VAT neutral
- You can claim the VAT back on diesel, when the diesel is used wholly and exclusively for the purpose of your trade.
- You can also claim the VAT back on Accountancy fees, telephone, light and heat, advertising
- If you have stock that you are reselling that had VAT on the original invoice, then you can claim the VAT back on that.
- VAT on materials, equipment and repairs for items that are for the business can also have the VAT claimed back.
- VAT on cars purchased for stock in trade by motor dealers, driving schools and car hire companies can be claimed back
- 20% of the VAT on the purchase or hiring of passenger motor vehicles can be claimed back by VATable persons once certain conditions are met, one of which is that there is at least 60% business use.
There are, of course, costs that VAT cannot be claimed back on.
These would include such things as:
- You cannot claim the VAT back on petrol, even though you can claim the VAT back on diesel.
- VAT on food cannot be claimed, except for a food business.
- VAT on entertainment costs cannot be claimed back. Whether this is for your clients or not, it is unfortunately not a VAT reclaimable cost.
- VAT on accommodation cannot be claimed except in the case of accommodation to attend a qualifying conference.
- VAT on personal expenses such as home TV, broadband etc cannot be claimed back.
It is important to note that not everyone is in the same situation as above. You may be running a business that carries out VAT-exempt activities. These would be businesses like doctors and financial institutions. These businesses do not charge VAT as they are VAT exempt but cannot claim VAT on input costs
Does your business provide ‘VATable supplies’ like consultancy or ‘non-VATable supplies’ like training? In circumstances like this, you can only claim a proportion of the VAT that has been incurred.
Important
When you are in the VAT net, the most important piece of advice that we can give you is to ensure that you keep proper records and that you hold valid VAT invoices for VAT that you claim back. In many cases, Revenue will look for a sample of invoices especially when the client is filing a VAT refund claim.
VAT Thresholds
These are the basic thresholds for VAT and if you think that your business is likely to exceed the thresholds then you are obliged to register for VAT.
- €37,500 in the case of persons supplying services only.
- €35,000 for taxable persons making mail-order or distance sales into the State.
- €41,000 for persons making acquisitions from other European Union Member States.
- €75,000 for persons supplying goods.
- €75,000 for persons supplying both goods and services where 90% or more of the turnover is from the supplies of goods.
If you would like further information or personalised information regarding your specific business give us a call on 01 539 2870 or email info@expertservices.ie
Expert Services can prepare and file your VAT return for you, taking out the worry and time that you could spend.