Frequently Asked Questions

Have any questions regarding VAT? Below are some of the most common questions people
have.

If you need bespoke advice or VAT answers, then speak to one of our qualified VAT specialists
on 0333 3636 253. Alternatively, fill in our contact form and one of our colleagues will be in
touch.

Can businesses claim back VAT on electric, company or any other cars?

The amount of VAT that can be claimed usually depends on what sort of vehicle.

For brand new vehicles, you might be able to claim all of the VAT. However, the vehicle must
only be used for business purposes. This means that you cannot use the vehicle for any reason
other than to undertake business. This means using the car for leisure and out of hours periods,
and it also includes traveling to and from work.

The same applies for commercial vehicles such as vans, lorries and farming vehicles. If used for
business purposes, you can also reclaim VAT for caravans, RVs, motorhomes, motorcycles,
combi-vans and car-derived vans.

You may also be able to claim full VAT if your vehicle is mostly used for:

● a taxi service
● driving instruction service
● vehicle hire

When it comes to fuel costs, you will be responsible for keeping accurate records if you wish to
reclaim VAT. However, it's always best to discuss your options with a VAT specialist.

Can any business be VAT registered?

Any business can be VAT registered. It is important to note that businesses that earn under
£85,000 annually (such as a sole trader) do not have to pay VAT, though it is a voluntary option
that some businesses choose to do.

The way that turnover is calculated is the total value of everything sold that is not exempt from
VAT. This includes things such as insurance, postal stamps and health services.

If your business’ annual turnover is over £85,000 then you are legally required to register for
VAT. Being registered for VAT comes with a number of benefits, including being able to reclaim
VAT on things purchased for your business. If you pay more in VAT than you collect from
customers, then reclaiming can assist in making up the difference.

However, registering for VAT does come with extra responsibilities. You will need to undertake
additional paperwork, and depending on your sales you may be required to make additional
amounts to HMRC.

If you’re unsure about whether your business should register for VAT, then it’s best to discuss
with an expert. At The VAT People, we speak with hundreds of business owners and advice on
VAT payments. Inquire today to see how VAT could benefit your business.

Are business rates VAT exempt? Should they be included on a VAT return?

Business rates are a type of tax that are applied to most commercial and non-domestic
properties. Because of their tax nature, they are not applicable to VAT. They are out of the
realm of VAT, and are not a part of your VAT return.

The kinds of properties that require business rates include:
● Cafes
● Shops
● Offices
● Warehouses
● Factories
● Pubs
● Holiday rental homes
● Guest houses

Any time a property is used–either fully or partially–for non-domestic reasons, then you will have
to pay business rates. As with any tax, they are eligible to be included towards your allowable
expenses on your tax returns.

The things that should be included on your VAT return are those which your business paid VAT
on to conduct your operations. Purchases and expenses must be solely business related, and if
it is used outside of work then you must be able to calculate how much of its use was business

related before you can reclaim it. Of course, this means you must keep clear records of your
purchases and you must prove that VAT was in fact paid.

You must also be aware of things you cannot claim VAT on, such as:

● Expenses for entertainment
● Purchases made using the VAT Flat Rate Scheme (restrictions apply)

What is the difference between a VAT exemption and products that are zero-rated?

While similar, VAT exempt products and zero-rated products are different at their core. Items
that are exempt from tax are not the same as zero-rated items. Even if the value of VAT is zero
on a product, they are still seen as having VAT, as they are technically still taxable items.

Some goods are deemed non-taxable by the government, and if your business solely sells
these items, then your business cannot register for VAT. This would put your business in the
VAT-exempt category.

If your business sells some exempt items and some taxable items, then your business is
partially exempt.

If you are VAT exempt, it means that you are not able to register for VAT or reclaim VAT, as you
do not sell any taxable products to consumers. It is possible that you may buy taxable products
to conduct your business, and you will be required to pay VAT on those products and will not be
able to reclaim the VAT incorporated into those purchases. That said, partially exempt
businesses can reclaim VAT in such circumstances.

Exempt products include, but are not limited to:

● Insurance
● Granting credit loans
● Postage stamps or services
● Health services

Do you pay VAT on business electricity? How to calculate VAT on business electricity

Energy tariffs for businesses already include VAT costs, and you should be able to see the rate
through your provider. And though they are a B2B (business to business) transaction, you
cannot reclaim the VAT paid.

The usual rate employed for business energy tariffs is 20%. This is automatically applied to your
bill. Though depending on the nature of your business and how energy is used within it, it is
possible to achieve a 5% discount on your rate.

There are a number of factors that can allow your business to achieve a 5% discounted rate.
These include:

● You use low amounts of energy in your business. This is described as less than 33kWh
each day and 1,000kWh of electricity each month. For gas use it is 145kWh a day or
4,397kWh a month.
● Your business is a charity or non-profit organisation. You can also claim for the past four
years when you were unaware that you had been overpaying towards your energy tariff.
● 60% or more of your energy goes towards domestic use. If your property is used for a
mixture of domestic and non-domestic, then you must calculate how much is used for
each.

Get in touch

For assistance in calculating how much of your energy is eligible for a VAT reclaim, get in touch
with our VAT experts today.

Useful Information

Watch Our Videos

Get the vital information you need quickly and easily by watching one of our guidance videos - topics include VAT assessments and penalties, VAT for charities, and maximising VAT recovery.

View Videos