Hi there,

I have a question regarding the claiming income tax for a sole trader, hopefully somebody can help!

If a sole trader has been issued with VAT invoices from a supplier, but the sole trader in question is not VAT regesitered, can the gross amount (i.e. invoice value inclusive of VAT) be clamied back as an expense against profit and hence the amount of income tax payable?

Or is only the net amount reclaimable, the VAT element being ‘lost’ due to the sole trader not being VAT registered?

Many thanks!!

Welcome to the forums.

The gross amount is included in the profit and loss account for an unregistered trader.

What is in the accounts are the cost to the business, a VAT registered trader doesn’t ‘own’ the VAT as it will either be paid over or reclaimed from HMRC so expenses and sales are declared net whereas an unregistered trader will never be able to reclaim that input VAT so will state the expenses gross.

I hope that helps

Bluewednesday - January 17 2010 12:40 PM

Welcome to the forums.

The gross amount is included in the profit and loss account for an unregistered trader.

What is in the accounts are the cost to the business, a VAT registered trader doesn’t ‘own’ the VAT as it will either be paid over or reclaimed from HMRC so expenses and sales are declared net whereas an unregistered trader will never be able to reclaim that input VAT so will state the expenses gross.

I hope that helps

Hi Bluewednesday,

That’s as I thought - many thanks for your help!