We have a bit of a dispute with HMRC on the flat rate scheme and reclaiming input VAT outside of the scheme on capital items.
We are trying to reclaim the VAT on website development costs. The costs was well over the £2k minimum, and within all the other requirements as far as I can see.
HMRC have come back and disallowed it, sending me to looking at Chapter 15 of Public Notice 733, as well as Regulations 55E of VAT Regulations 1995.
From looking at these, I can see no example of why our capital item would be excluded - it falls within none of the 'exclusions' that these notices go through.
Neither of these publications though are clear on what is meant by the 'services' exclusion - does anyone have experience of this??
Secondly, if the VAT say it is not a capital item, can I then expense the item through the P&L (rather than in fixed assets where it is now) and reclaim corporation tax? Or can the VAT treatment and the accounting treatment be different?