Non Claimable VAT Query

Hi all, I’d love some help in explaining how to exclude non VAT-claimable purchases from the VAT return. I have serveral purchases made under “UK Entertainment” for client entertaining, and these are not entitled to VAT or Corp tax relief. I’ve created suppliers for each of them, and created purchased with the items including VAT as normal. I cannot see how to exlude these form the VAT return. Do I simly set the purchase to “No VAT” and enter the total amount to be the cost inclusive of VAT?

Thanks in advance,


If they are not entitled to. Vat OR Corp tax releif why don’t you just tag the payment as directors loan account and skip all that faff?

Hi thanks for your reply. They were paid for by company debit card, and not from my (director’s) pocket, so while this would exclude them from the VAT return, it would be incorrect to add to DLA?

Removed as a misunderstood question and don’t wish to confuse readers.

Thanks Paul, I understand the DLA is both for drawing and for money owed by the director. My confusion is how it’s repaid, since I personally won’t be repaying it. The purchases were client entertaining on behalf of the business, so I can’t see why I would need to repay these personally. I’ve researched the issue to death hence the post here!



Ok so it’s a genuine business expense just not allowable for Corp tax or vat.

In that case make the purchase receipt no vat and Inc the whole cost as the purchase. That avoids the vat side.

As for the corporation tax side. You would need to account for the payment when calculating the tax due.

Hi, where items have input tax but you are not able to reclaim it, they need to be included on the VAT return as purchases. The easiest way to do this is to treat them as zero-rated, i.e. as you say set the tax to zero rate and include the gross amount as the cost.

Make sure you tag them to a separate code for business entertaining, then when you do your corporation tax return it is easy to add them back to your profit as disallowable.

There is no need to use the DLA unless you have paid for them personally, rather than using a company card.

The DLA is exclusively for items you have paid for personally, or for expenses like mileage claims you wish to make or for loans you make to the company to help with cash flow.

The other side is to record money you have withdrawn from the company, either as payment of expenses, repayment of loan amounts, payment of dividends or other drawings.

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