Tax Category Tax: calculations, VAT, self-employment tips and more

How to Claim VAT Back on Tools

Value Added Tax, or VAT, is a sales tax applied to goods and services supplied in the United Kingdom, or UK.

Businesses registered for VAT, including sole trader businesses, such as builders and plumbers, may reclaim the VAT content of any purchases made to use in the operation of the business. A tradesman, such as a plumber, can reclaim the VAT paid on the purchase of tools used for business purposes, from Her Majesty's Revenue and Customs, or HMRC, the government agency responsible for the administration and collection of VAT in the UK.

Collect the VAT invoices relating to the purchase of tools in the last VAT accounting period. Most businesses file VAT returns every quarter. Make sure that the purchases are entered into your business accounts, with the VAT component clearly shown as a separate item, for each entry. You can only claim back the VAT paid for the purchase of tools, as part of your general VAT return, so these items must be included with all your other purchases, in your accounts.

Add up the VAT due to HMRC, from the sales your business has made, and which are included in your business accounts. Add the VAT component of any business-related purchases you have made, including the purchase of tools.

Subtract the VAT component of your purchases, from the amount of VAT due to HMRC, if the VAT you have collected from sales is greater than the VAT you have paid on purchases. The VAT you have paid out, including the VAT paid for tools, will be offset against the amount of VAT due to HMRC, reducing the amount you have to pay. If the amount of VAT paid on purchases is greater than the amount of VAT you collected on sales, HMRC will pay you the difference as a refund.

Fill out form VAT 100, which is used for filing a paper-based VAT return, or log into your online account on the HMRC website, and click "Submit your VAT return," to use the electronic version of the VAT 100 form. Put the amount of VAT collected from sales in box one, and put the amount of VAT from goods you have bought, but not yet paid for, if any, in box two. Put the total of boxes one and two in box three. This is the amount of VAT due to HMRC.

Write, or enter, the amount of VAT you are reclaiming in box four. Write, or enter, the difference between box three and box four in box five on form VAT 100. If box three is greater than box four, the amount in box five is the amount you must pay to HMRC. If box four is greater than box three, the amount in box five is the amount that HMRC must refund to you.

Hit the "submit button" if you are filing an online return, to file the return with HMRC. If you are filing a paper-based return, you should post your return to HMRC, and you should use the pre-addressed envelope supplied with the return form.

Things Needed

  • Up-to-date business accounts
  • VAT invoices
  • VAT 100 return form