Hmmm ... 'grey areas'... what other outfit does that remind me of?
I actually think the VAT reclaim process is quite clear. I've reclaimed about £4000 of professional training costs from the VAT man.
Just ask yourself do I pay VAT on my training to become a
professional pilot? If Yes then ask one further question.
Will I be working in a manner where I will be collecting VAT for my flying services/goods in the future (eg self employed)? If Yes again then the answer is you can apply to reclaim the VAT if you are VAT registered.
To become VAT registered you need to provide evidence that you are going to collect VAT on behalf of the tax man in the future. In my case it was easy. I just sent them some invoices that I had submitted as a freelance pilot and a photocopy of a cheque from my customer (the school I work for as a freelancer). If you are not already trading I'm guessing you'll need a business plan of some sort, but I didn't take this route.
The only real complications that I can see is that, as Whirlybird suggests, there is a time limit on how far back you can reclaim VAT before you are VAT registered. On goods it is 3 years and services is 6 months. Also if you don't end up collecting VAT for the tax man then they will ask for any refunds back!
Once trading you submit an online VAT return every month. This consists of half a dozen boxes. Nothing difficult, just how much VAT you have paid against how much VAT you have collected. I also claim my VAT on the petrol I use to get me to the airport. Take the difference between the two and you either hand some money over or you get a refund.
The monthly chore is a bit of a pain but the cheque was a nice little reward for my efforts. I didn't use an accountant just read this thread and did some research. Then I called the VAT helpline when I thought I knew what I was supposed to do. I was actually audited after I submitted my big claim but that was pretty painless because I had kept all my records and receipts.
I thought this thread was pretty straightforward compared to trying to get to grips with some of the CAA regulations! Thanks PPruners for an excellent thread.
Good luck with your venture Staywest. I think you need to read between the lines in this thread, remain positive and stay legal.