Claiming Back VAT on Accountancy Fees: A Comprehensive Guide

If you run a business, you may have to pay VAT on all sales once the £85,000 level is reached. As a result, you might need to hire an accountant to help you manage your finances and ensure that you comply with all relevant VAT regulations. However, did you know that you can claim back the VAT on accountancy fees that you pay to your accountant?

In general, you can claim back the VAT on accountancy fees if you are a VAT-registered business and the fees were incurred for business purposes. According to HMRC, VAT on a sole trader’s or a partnership’s accountancy fees should usually be claimed in full subject to the normal rules, in order to avoid disputes over small amounts of tax. However, you cannot reclaim the VAT on your purchases except for certain capital assets over £2,000.

Claiming back the VAT on accountancy fees can help you reduce your business costs and improve your cash flow. If you are unsure whether you are eligible to claim back the VAT on accountancy fees, you can check the relevant rules and guidelines on the GOV.UK website or consult with your accountant. By claiming back the VAT on accountancy fees, you can focus on growing your business and achieving your goals without worrying about unnecessary expenses.

Understanding VAT on Accountancy Fees

If you’re a business owner, you’re likely to have incurred accountancy fees as a business expense. As such, you may be entitled to claim back the VAT paid on these fees.

To claim back VAT on accountancy fees, you must have a valid VAT invoice from your accountant. The invoice should clearly state the amount of VAT paid, and the VAT registration number of the accountant. You can then claim the VAT paid as input tax on your VAT return.

It’s important to note that you can only claim back VAT on accountancy fees that relate to taxable supplies. If your accountant provides services that are exempt from VAT, you cannot claim back the VAT paid on those services.

If you’re unsure whether the services provided by your accountant are taxable or exempt, you may want to seek advice from a VAT accountant or HMRC. They can advise you on your entitlement to input tax and help you reclaim VAT on accountancy fees.

It’s also worth noting that if you have incurred accountancy fees that are not solely for business purposes, you cannot claim back the VAT paid on those fees. For example, if your accountant has prepared a personal tax return or a tax computation for an individual or a partnership partner, you cannot claim back the VAT on those services.

In summary, to claim back VAT on accountancy fees, you must have a valid VAT invoice, the services provided by your accountant must be taxable, and the fees must be solely for business purposes. If you meet these criteria, you can claim the VAT paid as input tax on your VAT return.

Eligibility for VAT Reclaim

If you are a VAT registered business, you may be eligible to claim back the VAT on accountancy fees. This includes sole traders and partnerships. However, it is important to note that not all accountancy fees are eligible for VAT reclaim.

To be eligible for VAT reclaim, the accountancy fees must be directly related to the VAT taxable business activities. This can include services such as bookkeeping, payroll, and tax advice. Private tax work, such as personal tax returns, is not eligible for VAT reclaim.

It is also important to keep accurate records of all accountancy fees and VAT payments. This will help you calculate the amount of VAT you can reclaim and provide evidence to HMRC if requested. You must also ensure that the VAT on accountancy fees has been correctly accounted for in your VAT returns.

If you have overpaid VAT to HMRC that exceeds the amount you may have paid in VAT to acquire your products, you can reclaim the overpaid VAT. VAT accountants can help you with this process and ensure that you are claiming the correct amount of VAT.

In summary, if you are a VAT registered business and your accountancy fees are directly related to your VAT taxable business activities, you may be eligible to claim back the VAT. Keep accurate records and ensure that the VAT on accountancy fees has been correctly accounted for in your VAT returns.

Record Keeping for VAT Reclaim

To claim back VAT on accountancy fees, you need to keep accurate records of your purchases and sales. This is important because HM Revenue and Customs (HMRC) may ask to see your records to ensure that you have paid the correct amount of VAT.

When you purchase goods or services, you should keep all receipts and invoices. These documents should include the supplier’s name and address, the date of the transaction, a description of the goods or services purchased, the VAT charged, and the total amount paid.

If you purchased goods or services before you registered for VAT, you may still be able to claim back the VAT. However, you must have the original invoice or receipt, and the goods or services must have been used to make taxable supplies after you became VAT registered.

It is also important to keep accurate records of your sales. You should keep copies of all invoices that you issue, including those for zero-rated, reduced, and VAT-exempt items. Your invoices should include your name and address, the date of the transaction, a description of the goods or services sold, the VAT charged, and the total amount paid.

To claim back VAT on accountancy fees, you must have a valid VAT invoice from your accountant. The invoice should include the accountant’s name and address, the date of the transaction, a description of the services provided, the VAT charged, and the total amount paid.

You should keep your records for at least six years, even if you stop trading. If you use digital record-keeping software, you should make sure that it meets HMRC’s requirements. You can find more information about record-keeping for VAT on the GOV.UK website.

Overall, keeping accurate records is essential if you want to claim back VAT on accountancy fees. By doing so, you can ensure that you pay the correct amount of VAT and avoid any penalties or fines from HMRC.

VAT on Specific Business Expenses

When it comes to claiming back VAT on business expenses, there are certain expenses that are eligible for VAT refunds. In this section, we will discuss VAT on specific business expenses and how you can claim them back.

VAT on Office Supplies

If you purchase office supplies for your business, you may be eligible to claim back the VAT on these expenses. This includes items such as stationery, printers, computers, and phones. However, if you use these items for personal use as well, you will need to apportion the VAT based on the percentage of business use.

VAT on Business Travel

If you or your employees travel for business purposes, you can claim back the VAT on travel expenses such as fuel costs, train tickets, and hotel stays. However, if the travel includes personal use, such as a weekend trip, you will need to apportion the VAT based on the percentage of business use.

VAT on Business Entertainment

If you entertain clients for business purposes, you may be eligible to claim back the VAT on these expenses. This includes expenses such as client entertainment, staff entertainment, and business meals. However, you can only claim back the VAT on the cost of the food and drink, not on any additional expenses such as travel or accommodation.

It is important to keep accurate records of all your business expenses, including VAT, in order to claim back the correct amount. Make sure you keep all receipts and invoices, and note the percentage of business use for any items that are used for personal use as well.

When it comes to purchasing goods and supplies, make sure you shop around for the best prices from reputable suppliers. This will help you keep your expenses down and ensure you are not overpaying for items.

Overall, claiming back VAT on business expenses can be a valuable way to reduce your costs and improve your bottom line. By understanding which expenses are eligible for VAT refunds and keeping accurate records, you can maximise your VAT reclaims and keep your business running smoothly.

VAT on Capital Goods and Assets

When you acquire or create an expensive capital asset, or already have one when you register for VAT, you may have to adjust the amount of VAT you reclaim. This is done by using the Capital Goods Scheme (CGS). The scheme applies to most capital goods, including land and buildings, vehicles, and computer equipment.

Under the CGS, you must keep records of the VAT you reclaim on capital goods and assets. You must also keep records of any changes in use, sale, or disposal of these goods. The scheme also applies to goods that you acquire or create before you register for VAT.

If you acquire a capital asset for both business and non-business use, you can only claim back the VAT that relates to the business use. The non-business use is known as private use. You must account for the private use of the asset by making a VAT adjustment.

The adjustment period for the CGS is ten years. During this period, you must make adjustments to the amount of VAT you have claimed if there are any changes in the use of the asset or if you sell or dispose of it.

If you acquire or create a capital asset for £50,000 or more (before VAT), you must account for the VAT using the CGS. You can choose to hold all or part of the asset outside the VAT system. If you do this, you cannot reclaim any VAT on the asset.

The CGS also applies to land and buildings. If you acquire or create a building or land for business use, you can reclaim the VAT on the purchase. However, if you use the building or land for non-business purposes, you must make a VAT adjustment.

In summary, the CGS applies to most capital goods and assets, including land, buildings, vehicles, and computer equipment. You must keep records of the VAT you reclaim and any changes in use, sale, or disposal of these goods. If you acquire a capital asset for both business and non-business use, you must account for the private use of the asset by making a VAT adjustment. The adjustment period for the CGS is ten years.

Special VAT Schemes

If your business falls under certain categories, you may be eligible for special VAT schemes. These schemes are designed to simplify the VAT process and reduce administrative burdens. Here are some of the special VAT schemes you may consider:

Flat Rate Scheme

The Flat Rate Scheme (FRS) is a simplified VAT scheme designed for small businesses with a turnover of less than £150,000. Under this scheme, you pay a fixed rate of VAT on your sales, but you cannot reclaim VAT on your purchases except for certain capital assets over £2,000. The fixed rate varies depending on your business sector, and it is lower than the standard rate of 20%.

Annual Accounting Scheme

The Annual Accounting Scheme (AAS) is another simplified VAT scheme designed for small businesses. Under this scheme, you make advance payments towards your VAT bill based on your previous year’s turnover. You only need to submit one VAT return per year, and you have more time to pay your VAT bill. This scheme can help you manage your cash flow better.

Second-Hand Margin Scheme

If you sell second-hand goods, works of art, antiques, or collectors’ items, you may be eligible for the Second-Hand Margin Scheme. Under this scheme, you only pay VAT on the difference between the purchase price and the selling price of the item. You cannot reclaim VAT on your purchases, but you may charge VAT on your sales.

Bad Debt Relief

If your customers do not pay you, and you have already accounted for the VAT on the sale, you may be able to claim Bad Debt Relief (BDR). BDR allows you to reclaim the VAT you have already paid to HMRC on the sale. You must meet certain conditions to claim BDR, such as proving that you have taken reasonable steps to recover the debt.

Going Concern

If you sell a business as a going concern, you may be able to transfer the VAT registration number to the buyer. This means that the buyer can continue to trade without having to apply for a new VAT registration number. This can make the sale process easier and more attractive to potential buyers.

In conclusion, special VAT schemes can help you simplify the VAT process and reduce administrative burdens. You must carefully consider whether these schemes are suitable for your business and seek professional advice if necessary.

Claiming Back VAT

If you run a business that sells taxable goods to customers, you are required to pay VAT on all sales once the £85,000 level is reached. However, you can claim back VAT on certain expenses, including accountancy fees, that you incur while running your business.

To claim back VAT on accountancy fees, the following conditions must be met:

• The fees must have been charged on a VAT invoice by a registered VAT supplier.
• The services provided must be wholly and exclusively for the purposes of your business.
• The VAT you are claiming back must not relate to any exempt supplies you make.

Once you have met these conditions, you can claim back the VAT you have paid on your accountancy fees. You can do this by including the amount of VAT you are claiming back on your VAT return.

It is important to note that you cannot claim back VAT on accountancy fees that relate to non-business activities, such as personal tax returns. You can also only claim back VAT on accountancy fees that have already been paid, not on fees that are due to be paid in the future.

In addition to accountancy fees, you can also claim back VAT on other business expenses, such as rent, equipment, and stock. However, it is important to keep accurate records of all your expenses and VAT payments to ensure that you are claiming back the correct amount of VAT.

Overall, claiming back VAT on accountancy fees and other business expenses can help reduce the amount of VAT you pay and improve your cash flow.

Conclusion

In conclusion, claiming back the VAT on accountancy fees can be a complex process, but it is an important one for businesses and individuals alike. By doing so, you can reduce your overall tax bill and ensure that you are not paying more than you need to.

If you are seeking tax advice or need help with inheritance tax planning, it is important to choose an accountant who has experience in these areas. They can help you to understand the rules and regulations surrounding VAT and ensure that you are claiming back the correct amount.

When it comes to splitting accountancy fees between personal and business proportion, it is important to keep accurate records and be transparent about the work that has been carried out. This will help to ensure that you are not overpaying on VAT and that you are claiming back the correct amount.

If you have stocks or other investments, it is also important to consider the VAT implications of any accountancy fees that you pay. Your accountant can help you to understand these implications and ensure that you are claiming back the correct amount.

Overall, claiming back the VAT on accountancy fees is an important process that can help you to save money and ensure that you are not overpaying on tax. By working with an experienced accountant and keeping accurate records, you can make the process as smooth and straightforward as possible.