Essentially, VAT can only be recovered on capital assets with a VAT-inclusive price of £2,000 or more.
However, you do not need to spend that on one single capital asset. If for example, you purchased a number of pieces of equipment at the same time from the same supplier, and the total price was over £2,000 including VAT, then you could require the VAT charged to you.
But there are other restrictions as follows:
- It must be a purchase of goods; and not services
- Leased/ hired assets are deemed to be a supply of services; therefore, if you hired a van, you could not recover the VAT on the rental payments
- In contrast, if you say purchased a van under a Hire Purchase agreement, then this is deemed to be a supply of capital goods and any VAT could then be recovered
- You cannot recover the VAT on capital goods that you intend to resell- whether you are selling them on their own or incorporated into other goods to supply to someone else
- You cannot recover the VAT on capital goods that you intend to let, lease or hire out- for example, a bouncy castle
- Buildings materials and building work are not capital goods- even if you buy them for someone else to actually undertake the work with
This list is not fully exhaustive, but highlights the most common requirements that might apply.
I would encourage you to speak with a professional such as your local TaxAssist Accountant if you are considering buying any capital items and would like clarification on the likelihood of recoverability of the VAT.
By Jo Nockels
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