1. What Is VAT and Who Can Claim It Back?
Value Added Tax (VAT) is a consumption tax charged on most goods and services in the UK. Businesses that are VAT registered can reclaim the VAT they’ve paid on eligible business-related purchases.
2. When Can You Claim Back VAT?
You can claim VAT back if:
- You’re VAT registered with HMRC.
- The purchase is for business purposes.
- You have a valid VAT invoice or receipt from a VAT-registered supplier.
3. What VAT Can You Reclaim?
- Goods for resale.
- Business equipment and tools.
- Stock and raw materials.
- Company vehicles (full or partial claim depending on usage).
- Business travel costs (e.g., hotels, fuel, train tickets — if VAT is charged).
- Professional services (e.g., accountants, marketing agencies).
4. What VAT Can’t You Reclaim?
- Non-business purchases.
- Client entertainment costs.
- Certain cars used for personal purposes.
- Goods and services used for exempt or non-taxable activities.
5. Claiming VAT on Startup Costs
If you registered for VAT after you started trading, you can still reclaim:
- VAT on goods bought up to 4 years before registration (still in use).
- VAT on services bought up to 6 months before registration.
6. How to Claim Back VAT
- Submit a VAT Return to HMRC (usually quarterly).
- Include VAT on purchases in your return.
- Offset VAT you’ve paid against VAT you’ve collected from customers.
- If your purchases exceed your sales VAT, HMRC will refund you.
7. Record-Keeping Requirements
- Keep VAT invoices and receipts for at least 6 years.
- Maintain accurate digital records if using Making Tax Digital (MTD) software.
8. Special Cases
- Imports from outside the UK: VAT can be reclaimed if recorded correctly.
- Reverse charge VAT: You can reclaim the VAT you declare on certain services from abroad.
- Flat Rate Scheme: You can’t usually reclaim VAT on purchases except for certain capital assets over £2,000.
Frequently Asked Questions
Q1: Can you claim VAT back if you’re not VAT registered?
No, only VAT-registered businesses can reclaim VAT.
Q2: Can I claim VAT on fuel for personal and business use?
Yes, but you must adjust for personal use or use the fuel scale charge.
Q3: Can I claim VAT on second-hand goods?
Yes, if VAT was charged and you have a proper VAT invoice.
Q4: How long do I have to claim VAT back?
Up to 4 years for goods and 6 months for services before registration.
Q5: Can I claim VAT if my sales are VAT exempt?
No, you can’t reclaim VAT on purchases used for VAT-exempt sales.
Q6: Do I get the VAT refund instantly?
No, HMRC processes refunds after you submit your VAT return, which can take a few weeks.
Conclusion
You can claim back VAT in the UK if you are VAT registered, the expense is for business purposes, and you have the correct documentation. Proper record-keeping and understanding what qualifies are essential to maximise your VAT reclaims.