Hello AnnieMac,
From the 2008 VAT guide
10.5 Right to deduct VAT - general rule
In computing the amount of VAT payable in respect of a taxable period, an accountable person may deduct the VAT charged on most goods and services which are used for the purposes of his or her taxable business. No deduction may be made for the VAT on goods and services used for any other purpose, such as VAT exempt activities, (but see paragraph 10.10 below). To be entitled to the deduction the trader must have a proper VAT invoice or relevant Customs receipt as appropriate. Persons required to register for VAT in respect of intra- Community acquisitions only are not entitled to a deduction in respect of that VAT.
While a deduction of VAT is allowable only on purchases which are for the purposes of a taxable business, a situation may arise where a portion of a trader’s purchases may be for the purposes of the taxable business and the remaining portion for the trader’s private use, for example, electricity, telephone charges, heating expenses etc. where the business is carried on from the trader’s private residence. It may also arise that inputs may be used for both taxable and non-taxable activities. In such cases, only
the amount of VAT which is appropriate to the taxable business is deductible. Similarly where a person engages in both taxable and exempt activities (dual-use inputs) it is necessary to apportion the credit between the inputs used for taxable and exempt activities. Paragraph 10.10 below deals with the deduction of VAT for businesses engaged in both taxable and exempt activities and gives direction in relation to property transactions.
10.7 VAT not deductible
An accountable person may not deduct VAT on any of the following, even when the goods and services in question are acquired or used for the purposes of a taxable business:
• expenditure incurred by him/her on food or drink, or other personal services for him/her, his/her agents or employees, except to the extent, if any, that such expenditure is incurred in relation to a supply of services in respect of which he/she is accountable for tax,
• expenditure incurred by him/her on accommodation other than qualifying accommodation in connection with attendance at a qualifying conference as defined in the legislation. (Please see VAT Information Leaflet entitled ‘Conferences – VAT deductability’),
• expenditure incurred by the accountable person on food or drink, or accommodation or other entertainment services, where such expenditure forms all or part of the cost of providing an advertising service in respect of which tax is due and payable by the accountable person,
• entertainment expenses incurred by the accountable person, his/her agents or his/her employees,
• the purchase, hiring, intra-Community acquisition or importation of passenger motor vehicles generally (category A for VRT purposes), (other than motor vehicles held as stock-in-trade, or for the purposes of the sale of those motor vehicles by a financial institution in the context of a hire-purchase agreement, or for the purpose of a business of the hiring of motor vehicles, or for use in a driving school business),
• the purchase, intra-Community acquisition or importation of petrol otherwise than as stock-in-trade,
• contract work involving the handing over of goods when such goods are themselves not deductible.
Essentially, VAT paid on expenses incurred in the course of doing business, i.e. anything you buy in order to conduct your business, can be claimed back. I don't think there is a list of "deductible items". However, apply common sense and if in doubt ask your accountant on the specific item(s) you are thinking of claiming back.
If you send me a PM with an e-mail address I will e-mail you the complete VAT guide.
Regards,
Rudolf289
