VAT adjustment for private use

VAT adjustment for private use is to be made when calculating your VAT payable to or refundable from HM Revenue and Customs (HMRC). The rule for claiming all VAT input tax paid on your business expenses are that the expenses must be incurred solely exclusively for your business.

The VAT input tax on the private use cannot be reclaimed and therefore VAT adjustment for private use must be made in your VAT return.

An example of this would be telephone charges where the business is run from home. If a telephone bill was received for £100.00 plus VAT, one third of this would be considered private use. Accordingly, one third of the VAT input tax cannot be reclaimed from HM Revenue and Customs.

The easiest way to account for VAT adjustment for private use is to reclaim all the input tax in the VAT records and when preparing your VAT return make a deduction from the total input tax, disallowing for the private use proportion of the tax that the business is not entitled to reclaim. Do keep a clear record of how the disallowed amounts are calculated. HMRC may ask for the breakdown.

Seek accountants help or contact HMRC directly if you have any questions about VAT return compliance.

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