When You Can Not Reclaim VAT

For most fully taxable businesses, VAT can be reclaimed on goods and services used in the business. This means businesses must consider where there is any personal or private use of goods or services purchased for the business as the business can only reclaim the business part of the VAT.

You cannot reclaim VAT for:

  • anything that’s only for private use
  • goods and services your business uses to make VAT-exempt supplies
  • business entertainment costs
  • anything you’ve bought from other EU countries
  • goods sold to you under one of the VAT second-hand margin schemes
  • business assets that are transferred to you as a going concern

There are different rules for a business that incurs expenditure on taxable and exempt business activities. These businesses are partially exempt for VAT purposes and are required to make an apportionment between their taxable and exempt activities using a ‘partial exemption method’ in order to calculate how much input tax is recoverable.

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