VAT Flat Rate Scheme: Capital Assets Over £2,000


Under the rules of the VAT Flat Rate Scheme you don’t claim for the VAT you pay on your day to day purchases.  However, if you buy an asset of more than £2,000 including VAT then you should be able to claim back the VAT you paid on your VAT return.

What is a Capital Asset?

A capital asset is something that you buy that helps your business generate money and function.  It may be a laptop if you are a consultant or camera equipment if you are a photographer.

If you buy a capital asset that costs more than £2,000 including VAT then there are provisions as part of the Flat Rate Scheme that allow you to claim the VAT back.

Note: you must spend more than £2,000 in a single transaction.

How to Claim Back VAT on Capital Assets on you VAT Return

You claim back the input tax you have paid in box 4 of your VAT return and enter the purchase price of the capital assets excluding VAT in box 7.

For example, you buy a computer for £2,200 which includes VAT of £366.67 therefore you enter:

Box 4: £366.67

Box 7: £1,833.33

If you use cash accounting, the same rules apply but you must account for VAT on any capital assets you have bought in the quarter that you paid for them.