1. Can Businesses Claim Back VAT?
Yes — if your business is VAT-registered with HMRC, you can claim back VAT you’ve paid on eligible business purchases. This process, known as VAT reclaim, allows you to offset the VAT you’ve paid on goods and services against the VAT you’ve charged your customers.
2. When You Can Claim Back VAT
You can reclaim VAT when:
- The purchase is for business purposes.
- You have a valid VAT invoice or receipt.
- You are VAT-registered at the time of purchase (with some exceptions for pre-registration claims).
3. What VAT Can Be Claimed Back On
Eligible expenses include:
- Stock or goods for resale.
- Business equipment (computers, machinery, tools).
- Office supplies and utilities.
- Certain travel costs (train, bus, taxi — not all vehicle use qualifies).
- Professional services (accountants, consultants).
4. What You Cannot Claim Back VAT On
HMRC does not allow VAT reclaims on:
- Client entertainment.
- Goods or services for personal use.
- Certain cars, unless used exclusively for business.
- Non-business-related expenses.
5. Claiming VAT on Pre-Registration Purchases
If you bought goods up to 4 years before VAT registration (and still have them) or services up to 6 months before registering, you may be able to reclaim VAT on them.
6. How to Claim Back VAT
- Keep accurate VAT records and receipts.
- File a VAT return (usually quarterly) through HMRC’s Making Tax Digital system.
- Deduct input VAT (paid on purchases) from output VAT (charged on sales).
- Pay HMRC the difference — or receive a refund if input VAT is higher.
7. Claiming VAT on Overseas Purchases
If you import goods, you can reclaim the VAT charged at the border. For EU goods, use the postponed VAT accounting system to reclaim on your VAT return.
8. Common Mistakes to Avoid
- Claiming without proper VAT invoices.
- Including non-business expenses.
- Missing deadlines for VAT returns.
- Poor record-keeping, which can trigger HMRC investigations.
9. Benefits of Claiming Back VAT
- Improves cash flow.
- Reduces overall costs.
- Ensures compliance with tax regulations.
Frequently Asked Questions
Q1: Can a business claim back VAT if not VAT-registered?
No, only VAT-registered businesses can reclaim VAT.
Q2: Can I claim VAT on fuel?
Yes, but only for the business portion — a fuel scale charge may apply if there’s personal use.
Q3: Can I claim VAT back on meals?
Generally, no — unless they’re for staff working away from their usual place of work.
Q4: How long do I have to reclaim VAT?
Usually up to 4 years for goods and 6 months for services bought before VAT registration.
Q5: Can I get a VAT refund if my business made no sales?
Yes, if your input VAT is higher than your output VAT, HMRC will issue a refund.
Q6: Do sole traders claim VAT back the same way as companies?
Yes, as long as they are VAT-registered.
Conclusion
Businesses can claim back VAT on eligible expenses if they are VAT-registered and follow HMRC rules. By keeping accurate records, submitting timely VAT returns, and only claiming for legitimate business costs, companies can maximise their VAT refunds and maintain compliance.