{"id":4485,"date":"2022-02-22T05:00:04","date_gmt":"2022-02-22T05:00:04","guid":{"rendered":"https:\/\/way2vat.com\/?p=4169"},"modified":"2022-10-31T06:54:47","modified_gmt":"2022-10-31T06:54:47","slug":"why-cant-i-recover-vat_gst-on-business-invoices","status":"publish","type":"post","link":"https:\/\/way2vat.com\/why-cant-i-recover-vat_gst-on-business-invoices\/","title":{"rendered":"Why Can\u2019t I recover VAT\\GST on Business Invoices?"},"content":{"rendered":"<p><span style=\"font-weight: 400;\">The most asked question we hear from businesses is why they can\u2019t recover VAT\\GST on costs they incur.\u00a0 In many cases the reason is obvious and is likely to be because the VAT\\GST rules specifically don\u2019t allow VAT\\GST recovery \u2013 an example of this would be VAT\\GST incurred on business entertainment which is blocked.\u00a0 Another reason is that the business does not hold the correct evidence to recover the VAT\\GST.\u00a0 Where a business does not have a valid VAT\\GST invoice it is unlikely that the tax authorities (in the UK this is HM Revenue &amp; Customs or \u201cHMRC\u201d) would allow VAT\\GST recovery.\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Sometimes the reason for lack of VAT\\GST recovery is less clear.\u00a0 A scenario which we are seeing more often is a case where a business has purchased goods or services and holds a proper VAT\\GST invoice on which VAT\\GST at the standard rate is shown.\u00a0 As occurs from time-to-time HMRC undertake a VAT\\GST audit and ask to see some or all of the purchase invoices. \u00a0 After inspecting the invoices, we have seen cases where HMRC have refused to allow the business to recover the VAT\\GST because the supplier should not have charged it in the first place.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Most people are confused by this.\u00a0 Surely if a supplier charges VAT\\GST and shows the VAT\\GST on the invoice, a customer should be entitled to recover the VAT\\GST in full.\u00a0 Herein lies the issue \u2013 was VAT\\GST properly chargeable in the first place?\u00a0 We have seen many cases where if the supplier has charged the wrong rate of VAT\\GST, HMRC does not allow the customer to recover the VAT\\GST.\u00a0 The following example demonstrates this.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Between July 2020 and the end of September 2021, the UK Government introduced a reduced VAT\\GST rate of 5% for certain supplies relating to hospitality and hotel accommodation.\u00a0 Between October 2021 and the end of March 2022 the VAT\\GST rate increased to 12.5%.\u00a0 During this period, when lockdown rules eased many businesses held staff team building events which qualified for the reduced rate of VAT\\GST.\u00a0 Some suppliers were either unaware of the VAT\\GST rate change or their systems were unable to cope with it, so continued to charge VAT\\GST at the standard rate of 20%.\u00a0 Businesses had the mistaken belief that if the supplier pays over the VAT\\GST to HMRC and the customer recovers the same amount, it surely shouldn\u2019t matter if the 20%, 5% or 12.5% VAT\\GST rate is used, because there is no loss of VAT\\GST to HMRC since it nets down to zero.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Unfortunately for the business in question HMRC didn\u2019t see things the same way and refused the business the right to recover 20% VAT\\GST when only 5% VAT\\GST should have been recovered.\u00a0 In HMRC\u2019s view, the customer was required to go back to the supplier and obtain a VAT\\GST credit note and refund for the 15% &#8211; the difference between the standard rate and reduced rate of VAT\\GST.\u00a0 In most cases this is a mere administrative inconvenience.\u00a0 The sting in the tail came when the supplier \u2013 a restaurant had ceased trading and was in liquidation.\u00a0 In such a case the customer was unable to go back to the supplier and obtain a refund.\u00a0 The end result was that the customer was assessed by HMRC for the 15% difference in VAT\\GST rates which proved an additional cost.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The lesson is clear \u2013 just because an invoice looks correct you still need to check that VAT\\GST was properly charged.\u00a0 If not, don\u2019t pay it and insist that the supplier charges the correct amount of VAT\\GST.\u00a0 If you wait until after you have paid it may be too late!<\/span><\/p>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>The most asked question we hear from businesses is why they can\u2019t recover VAT\\GST on costs they incur.\u00a0 In many cases the reason is obvious and is likely to be because the VAT\\GST rules specifically don\u2019t allow VAT\\GST recovery \u2013 an example of this would be VAT\\GST incurred on business entertainment which is blocked.\u00a0 Another [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":4170,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[26,1],"tags":[],"class_list":["post-4485","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-blog","category-vatgst"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v24.2 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Why Can\u2019t I recover VAT\\GST on Business Invoices? - w2v<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/way2vat.com\/why-cant-i-recover-vat_gst-on-business-invoices\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Why Can\u2019t I recover 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