If you're still unsure which transactions input tax can be claimed on, don't despair.
The Practical Vat Handbook has some general rules you can use to ensure you get this right so you can put money back into your company.
Revealed: Five general rules of input tax
Input tax general rule #1: You must be in possession of a valid tax invoice!
Input tax general rule #2: You can claim input tax on any item you purchase or any expense you have, as long as it is used in the course of your Vat registered business. (Vat must have been charged by your supplier, on the transaction).
Input tax general rule #3: You can claim input tax on second-hand goods you buy for your business. This is known as notional input tax. But you'll need to keep a record of the details of the person who sold you the goods, a description of the goods and the amount you paid to make this claim.
Input tax general rule #4: If you discover you haven't claimed Vat back on some back invoices, you can still do so provided it's within five years of the date of that invoice.
Input tax general rule #5: If you only render zero rated supplies, for example, you sell fresh fruit and vegetables, you're still entitled to claim your input tax on your business expenses, such as rent, telephone and electricity.
Understanding the general rules that apply to input tax will help you boost your company's cash flow.