It does not have to be hard to reclaim VAT on your small business expenses. There are actually a number of steps that you can work through that allow you to successfully reclaim your VAT. Any company that has registered for VAT will be able to use this handy option and reclaim VAT on any purchases relating to the running of the business. Of course, there are a set of rules that you will need to stick to in order to ensure that VAT is properly calculated and documented.
While reclaiming VAT might seem like a hassle, particularly if you are doing it for the first time, it is something to look at. You will need to know what documents you need to do this as well as the expenses which are eligible for this and when you have to file the returns to make the process as quick and easy as possible.
Confirm That You Are Eligible To Reclaim VAT
The first step that you need to take is to ensure that your business is VAT registered. This needs to be done in order to submit a return. You can register on the revenue service website and this will generally be fairly easy to do.
Once you have registered your business, you will be provided with a VAT registration certificate that includes your VAT number. You need to keep this handy as you have to place your VAT number of all sales invoices from the moment you register. You will also need to have this number when it comes time to submit your returns. If you want to submit the VAT returns online, you will need to ensure that you have signed up for an online account.
Get Your Invoices And Proofs Of Purchase Ready
Once you have your online account ready, you will need to get all of your documents in order. It is important that you have copies of all the VAT invoices, receipts and other evidence which shows what items were purchased and used for the business. You will not have to keep a paper copy of everything as electronic versions will be sufficient. The proof of purchase must be issued by someone that is VAT registered and will need to contain all of the details that revenue requires such as your business name, VAT number, address and the date of the purchase.
There are a few minor exceptions that you will find for the times when you do not have the proof of purchase because you have lost the invoice or receipt. One of the exceptions is the fact that you do not need a receipt for purchases under a set amount. There are also some expenses that do not require detailed receipts such as purchases from petrol stations. However, you will need to ensure that you have proof of the purchase and that the supplier is VAT registered.
Calculate The Amount Of VAT Your Can Reclaim Or Will Need To Pay
If you have registered for VAT, there is another level of financial scrutiny that you need to keep track of and this is your VAT account. This is your own separate record of the tax that you have charged on sales and that you have paid on purchases. A VAT account is a simple running total of all the VAT charged for different business operations. There is accounting software that will create your VAT account for you and automatically track everything based on all of the eligible sales and expenses.
When you keep a separate record of the VAT, you will be able to calculate how much you owe revenue and how much you will be able to reclaim. If the VAT you paid on purchases is higher than the VAT you have charged your customers, you will be getting a repayment from revenue. However, if the calculation is the other way, you will owe the calculated amount to revenue.
It is important to note that there will be a slightly different format when you operate under certain schemes like the Flat Rate Scheme. With this scheme, VAT will be charged as a percentage of your turnover. This means that you will need to determine if this is higher or lower than what you actually paid and received on sales. Here is a list of VAT rates to give you an idea.
Submit Your VAT Return Online
Now that you are registered for an online account, have all of your documents in order and know how much you should claim or pay, you might wonder what the next step is. The final step will be to submit your VAT returns. The expenses that you claim on the VAT return will need to come from the VAT period that the return relates to. This could be a 3 month period if you are submitting your returns each quarter.
The due date for the submission will be one month and 7 days after the end of the VAT period. The deadline to reclaim VAT will be the same for both monthly and quarterly submissions. This means that if the VAT period is 1 January to 31 March, you will need to submit the return by 7 May. The expenses covered will be the first 3 months of the year and nothing else.
As a general rule, you will be able to reclaim VAT on goods that you bought up to 4 years before registering for VAT when completing your first VAT return. This will not include any goods that you have already sold before registering.
