claiming tax back on tools if you don't pay tax?

simplysounds

i've just started a part time job as a maintenance engineer at a leisure centre. due to my job i've had to buy some additional tools. i don't pay tax or NI as i don't earn enough. i went onto the hmrc to see if i can claim the VAT back. when i went through the process it asked if i pay tax? i entered 'NO' and it advised i'm not eligible. is this correct? why do i have to pay VAT on equipment for my job because i don't earn enough to pay tax? any help would be appreciated.

Rodders53

Are you employed or self-employed?

Grumpy_chap

simplysounds said:

i've just started a part time job as a maintenance engineer at a leisure centre. due to my job i've had to buy some additional tools. i don't pay tax or NI as i don't earn enough. i went onto the hmrc to see if i can claim the VAT back. when i went through the process it asked if i pay tax? i entered 'NO' and it advised i'm not eligible. is this correct? why do i have to pay VAT on equipment for my job because i don't earn enough to pay tax? any help would be appreciated.

You don't say whether you work as an employee (PAYE) or as a sole-trader.  It seems most likely that you are an employee.

Your post also conflates (income) tax and NI with VAT.

It is not possible to reclaim VAT on expenses unless you are a VAT-registered business (sole-trader or Ltd).  This does not apply in your case.

NI cannot be reclaimed once paid by an employee and differs from income tax in that NI is assessed with each payroll (weekly or monthly) whereas as income tax is assessed over the tax year.

That would then leave you with the potential to consider reclaim for income tax.  You cannot reclaim tax that you have not paid.  If you were able to reclaim tax, it would be your marginal rate (say 20%) from the cost of the tools (say £100).  If you had earnings high enough to pay income tax, then the test for reclaiming would be that the expense is incurred "wholly, exclusively and necessarily" to allow you to do your work.  For an employee (PAYE), that is quite a high hurdle as the default position would be that the employer would provide any items that are required in that way to allow the work to be done.

Did you ask whether the leisure centre has a tool store with equipment that you can use?

macman

If you are self employed, then the cost of business tools can be set against your tax bill, as they would be a legitimate business expense. If you are an employee, then your employer should be providing all the necessary tools and equipment for you.
You can only reclaim VAT if you are registered to pay VAT.
As above, you've not supplied the basic info needed in order to advise you (your employment status).

unholyangel

I think you're misunderstanding the purpose of tax relief also.

The purpose of tax relief isn't to pay any of the expense for you. Its so you don't pay tax on the income used to meet the expense.

For example if you bought a tool at £100 and your income was high enough to pay tax, that £100 would be after tax & nic had been deducted. So that could have potentially cost you £147 of your earnings (assuming basic rate). You'd get relief on £100 which would give you £20 back. Still £127 down for a £100 tool!

If you don't pay tax then its only cost you £100. 

jennifernil

Um......that does not make much sense to me!

K_S

unholyangel said:

I think you're misunderstanding the purpose of tax relief also.

The purpose of tax relief isn't to pay any of the expense for you. Its so you don't pay tax on the income used to meet the expense.

For example if you bought a tool at £100 and your income was high enough to pay tax, that £100 would be after tax & nic had been deducted. So that could have potentially cost you £147 of your earnings (assuming basic rate). You'd get relief on £100 which would give you £20 back. Still £127 down for a £100 tool!

If you don't pay tax then its only cost you £100. 

On a slightly tangential note, there are a few common scenarios in which 'tax relief' is paid even without you having paid income tax.

For example, if you are a low earner (< £12,570 but at least £3,600 in 2021/22) and in a relief at source arrangement (the most common pension arrangement for employees and also if you set up your own SIPP), the pension provider claims (from HMRC) and pays you 20p tax relief back for every 80p of your contribution received – no matter what the level of your earnings and irrespective of whether you pay income tax or not. 

If you earn less than £3,600 (all the way down to nothing), even then you can get tax-relief, limited to that on a gross contribution of £3,600.

In both the above cases, the fact that you do not pay any income tax does not prevent the pension scheme claiming the tax relief from HMRC and adding it to your pension pot.

unholyangel

K_S said:

unholyangel said:

I think you're misunderstanding the purpose of tax relief also.

The purpose of tax relief isn't to pay any of the expense for you. Its so you don't pay tax on the income used to meet the expense.

For example if you bought a tool at £100 and your income was high enough to pay tax, that £100 would be after tax & nic had been deducted. So that could have potentially cost you £147 of your earnings (assuming basic rate). You'd get relief on £100 which would give you £20 back. Still £127 down for a £100 tool!

If you don't pay tax then its only cost you £100. 

On a slightly tangential note, there are a few common scenarios in which 'tax relief' is paid even without you having paid income tax.

For example, if you are a low earner (< £12,570 but at least £3,600 in 2021/22) and in a relief at source arrangement (the most common pension arrangement for employees and also if you set up your own SIPP), the pension provider claims (from HMRC) and pays you 20p tax relief back for every 80p of your contribution received – no matter what the level of your earnings and irrespective of whether you pay income tax or not. 

If you earn less than £3,600 (all the way down to nothing), even then you can get tax-relief, limited to that on a gross contribution of £3,600.

In both the above cases, the fact that you do not pay any income tax does not prevent the pension scheme claiming the tax relief from HMRC and adding it to your pension pot.

And is relief for pension contributions the taxpayer claiming relief for expenses? Or do you think its perhaps something different entirely, covered by an entirely different section of the law? 

K_S

unholyangel said:

K_S said:

unholyangel said:

I think you're misunderstanding the purpose of tax relief also.

The purpose of tax relief isn't to pay any of the expense for you. Its so you don't pay tax on the income used to meet the expense.

For example if you bought a tool at £100 and your income was high enough to pay tax, that £100 would be after tax & nic had been deducted. So that could have potentially cost you £147 of your earnings (assuming basic rate). You'd get relief on £100 which would give you £20 back. Still £127 down for a £100 tool!

If you don't pay tax then its only cost you £100. 

On a slightly tangential note, there are a few common scenarios in which 'tax relief' is paid even without you having paid income tax.

For example, if you are a low earner (< £12,570 but at least £3,600 in 2021/22) and in a relief at source arrangement (the most common pension arrangement for employees and also if you set up your own SIPP), the pension provider claims (from HMRC) and pays you 20p tax relief back for every 80p of your contribution received – no matter what the level of your earnings and irrespective of whether you pay income tax or not. 

If you earn less than £3,600 (all the way down to nothing), even then you can get tax-relief, limited to that on a gross contribution of £3,600.

In both the above cases, the fact that you do not pay any income tax does not prevent the pension scheme claiming the tax relief from HMRC and adding it to your pension pot.

And is relief for pension contributions the taxpayer claiming relief for expenses? Or do you think its perhaps something different entirely, covered by an entirely different section of the law? 

@unholyangel Absolutely, I did preface my post saying that it was tangential to the topic  

I just wanted to make sure that readers didn't automatically assume that 'tax relief' was only available if you paid tax. I used to think that about pension tax-relief, to my detriment.

simplysounds

just to advise on my status: I'm paye, part time, i do not pay tax or NI, I do not pay into a pension, I am not VAT registered. My employer doesn't supply any tools to do my job. I don't understand why I can't claim VAT back on tools that I purchase in order for me to do my job just because I don't pay tax?

Jeremy535897

Only VAT registered persons can reclaim VAT.