STANDARD RATE VAT GUIDE

How does the standard rate VAT scheme work?

You charge 20% VAT to your client on your invoices. You pay this 20% VAT over to HMRC on a quarterly basis. You are able to reclaim the VAT on purchases and expenditure the company has incurred that has been subject to VAT. The VAT liability is calculated as the amount of VAT charged on your invoices less the VAT that you are able to reclaim on the expenditure incurred.

What is the amount of VAT that I can reclaim on my expenses?

The amount of VAT that you are able to reclaim will depend on how much (if any) VAT has been charged on the expenses the company has incurred. VAT registered businesses will either charge VAT at standard rate (20%), reduced rate (5%) or zero rate (0%). Other things will be exempt from VAT so it is important you retain receipts so you can see how much VAT you have been charged. You should only reclaim VAT on business expenses. HMRC specifically don’t allow for you to reclaim VAT on business entertainment.

Examples of expenses that don’t include VAT:

What do I need to do to reclaim VAT on my business expenses?

In order to reclaim VAT on your business expenses you need to record all expenses that have been incurred and note whether they include VAT or not. The most important thing is to retain all receipts as you will not be able to reclaim VAT without a valid receipt proving that VAT was charged. If you do not have a receipt that shows VAT was charged to you then you aren’t able to reclaim the VAT. All these receipts should be retained as part of your business records.