Fines and penalties? Find out how to reclaim the VAT
It is not uncommon for people to be given a fine or parking penalty whilst carrying out a business task. However, the good news for your balance sheet is that you may be able to reclaim the amount through your tax return.
For many businesses, parking fines over the course of a year can add up. Fines for all businesses, no matter the size, are hindering as they could be easily avoided. All companies watch spending and try to cut costs wherever possible, so to be hit with something which was not budgeted for can knock many companies off track.
Unfortunately, it is not possible to completely deduct the cost of a fine or penalty from your tax bill, but it is possible to save the VAT on them. The process is simple: the cost of the fine is included within your tax return and you will be provided with a VAT refund as long as you have kept a record of the fine and claim appropriately.
It is not possible to claim VAT on all types of fines and penalties, but for many, it is very simple. For example, if any charges were added on top of an existing charge the claim is very straightforward. An example of this would be when you purchase a car park ticket but then go over the time already purchased. The fine you are given is VAT deductible, so you could reduce the bill slightly for your business. It is also possible to claim VAT on any penalties you receive from a private firm. If the firm which has given the penalty marks your payment down as income, they could be charging VAT which you could claim.
Any fine which has been given by the government cannot be claimed on, for example, speeding fines or penalties for providing late returns. It is important that the fines and penalties you are given are only claimed on for things carried out during working time. Otherwise, this will be considered fraud.
If you would like more advice on what fines and penalties can be claimed on, please our Tax Partner Robin Stevenson
Robin Stevenson - Tax Partner
Tel: 01825 763 366
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