1. Understand Who Can Claim VAT Refunds
VAT refunds are available for:
- UK VAT-registered businesses reclaiming input VAT on business expenses
- Overseas businesses not based in the UK, under the VAT Refund Scheme
- International visitors (non-UK residents) on goods bought in the UK (via retailers in the scheme)
Each group has different rules, processes, and timeframes.
2. VAT Refund for UK Businesses
If you’re a UK VAT-registered business, you can reclaim VAT paid on:
- Goods and services used for business
- Equipment and stock
- Travel and subsistence (with restrictions)
You cannot reclaim VAT on personal expenses, business entertainment, or vehicles used for private purposes.
3. Submit VAT Return via HMRC
To reclaim VAT, file your VAT return using your:
- VAT online account or accounting software (Making Tax Digital compliant)
- Quarterly reporting period
- Box 4: Total VAT reclaimed on business purchases
The difference between VAT collected (sales) and VAT paid (purchases) determines if you owe HMRC or receive a refund.
4. Keeping Records
To successfully reclaim VAT, you must keep:
- Valid VAT invoices (showing supplier’s VAT number and breakdown)
- Receipts and business purpose proof
- VAT account with input/output details
Records must be retained for 6 years.
5. Time Limit for Reclaiming VAT
You can claim VAT on expenses from the last 4 years (if registered during that time). Late claims must be included in the next VAT return with a clear explanation.
6. VAT Refunds for Overseas Businesses
Non-UK businesses can reclaim UK VAT on:
- Trade show fees
- Hotel and travel costs
- Purchased goods (not exported)
To claim:
- Submit form VAT65A and evidence by 30 June following the refund year
- Have no UK VAT registration or taxable supply
- Provide original invoices and proof of business status
7. VAT Refunds for Tourists (Retail Export Scheme)
As of 2021, the UK no longer offers VAT refunds to overseas visitors for purchases made in-store. VAT-free shopping is no longer available unless buying through special export or delivery schemes.
8. Getting Paid Your Refund
If your refund is approved:
- HMRC pays directly to your bank account
- Processing usually takes 10–30 days
- Contact HMRC if no payment is received after 30 days
Ensure your bank details are up to date on your VAT online account.
9. Common Reasons for Rejection
Refunds may be denied due to:
- Invalid or missing invoices
- Ineligible items (e.g., entertainment)
- Outdated or incomplete VAT returns
- Not meeting registration or residency requirements
Always double-check entries and keep detailed records.
10. Professional Help for Complex Claims
If you’re unsure, an accountant or VAT specialist can help:
- Maximise eligible claims
- Avoid errors and penalties
- Navigate sector-specific rules (like property or exports)
They can also handle appeals if a claim is rejected.
Frequently Asked Questions
Q1: Can I claim VAT before my registration date?
Only on certain assets (4 years prior) and services (6 months prior), if still used by your business at registration.
Q2: How long does a VAT refund take in the UK?
Typically 10–30 days from submission. HMRC may take longer if they need more information.
Q3: Can I claim VAT on petrol and diesel?
Yes, partially. You can reclaim 50% of VAT on company car fuel and 100% on commercial vehicle fuel.
Q4: Are VAT refunds taxable?
No. VAT refunds simply return input VAT you’ve already paid. They’re not considered income.
Q5: Do I need to be VAT registered to claim a refund?
Yes, for UK businesses. Overseas businesses can claim under the VAT Refund Scheme without registering.
Q6: What’s the deadline for claiming VAT back?
Within 4 years for UK businesses. Overseas businesses must submit by 30 June following the refund year.
Conclusion
Understanding how to claim VAT refund in UK can save your business thousands each year. Whether you’re a local entrepreneur or an overseas visitor, following the correct process and keeping accurate records ensures a smooth, successful refund experience.
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