1. Understand What VAT Reclaim Means
Claiming VAT back in the UK allows VAT-registered businesses to recover the Value Added Tax paid on eligible purchases and expenses related to their business activities.
2. Ensure VAT Registration
Only VAT-registered businesses in the UK can reclaim VAT. You must register with HMRC once your taxable turnover exceeds the threshold (£90,000 as of 2024) or voluntarily below that.
3. Use a Valid VAT Number
To reclaim VAT, your supplier must be VAT-registered, and their VAT number should appear on your invoice. Always check that the number is valid on HMRC’s online database.
4. Maintain Proper VAT Invoices
Keep valid VAT invoices for every claim. A proper invoice must include:
- Supplier’s name and address
- VAT number
- Invoice number and date
- Description of goods/services
- VAT amount charged
5. Track All Business-Related Purchases
Only claim VAT on expenses wholly and exclusively for business use, such as office supplies, equipment, and professional services. For mixed-use purchases, claim only the business portion.
6. Understand Which Expenses Are Not Claimable
You can’t reclaim VAT on:
- Client entertainment
- Business gifts over £50
- Employee perks
- Non-business purchases
- Cars used for personal travel (with few exceptions)
7. Use Digital Bookkeeping Tools
Tools like Xero, QuickBooks, or Sage help you track and categorize VAT expenses accurately, which simplifies the reclaim process during VAT returns.
8. Submit VAT Returns Quarterly
You must file VAT returns—typically every quarter—via Making Tax Digital (MTD)-compliant software. Your return details the VAT you’ve charged customers and paid on business purchases.
9. Claim Input VAT
Input VAT refers to the VAT you pay on goods and services. You can deduct this from the VAT you’ve collected from customers (output VAT) when filing your return.
10. Use Flat Rate Scheme If Applicable
If you’re on the Flat Rate Scheme, you pay a fixed rate of VAT and cannot normally reclaim VAT on purchases, except for capital assets over £2,000.
11. Handle Partial Exemptions Correctly
If your business deals in both taxable and exempt supplies (e.g., financial services), you can only reclaim VAT related to taxable activities. Use HMRC’s partial exemption method for accuracy.
12. Backdate Your First VAT Reclaim
Upon VAT registration, you can reclaim VAT on goods bought up to 4 years earlier and services up to 6 months earlier, provided they were used for your business and you have valid invoices.
13. Monitor Deadlines
Reclaims must be made within four years of the tax year’s end in which the expense occurred. Delayed submissions can lead to denied claims.
14. Keep Records for Six Years
HMRC requires you to keep all VAT records, including invoices and receipts, for at least six years. Store them securely, either digitally or physically.
15. Seek Professional Advice for Complex Cases
If you’re unsure about claiming VAT in special scenarios (e.g., overseas purchases, imports), consult a VAT specialist or accountant to avoid errors and penalties.
Frequently Asked Questions
Q1: Can I claim VAT back if I’m not VAT-registered?
No, only VAT-registered businesses can reclaim VAT in the UK.
Q2: How do I know if an expense is eligible for a VAT reclaim?
It must be business-related, and you need a valid VAT invoice showing the VAT charged.
Q3: What happens if I make a mistake on my VAT return?
You can adjust minor errors on your next VAT return or report serious ones to HMRC using Form VAT652.
Q4: Can I claim VAT on international purchases?
Yes, but different rules apply. For imports, use the postponed VAT accounting system. For EU purchases, ensure proper VAT treatment.
Q5: Is there a minimum amount required to claim VAT back?
No minimum, but claims should be accurate and justifiable with valid documentation.
Q6: What if I use a purchase for both business and personal use?
You can only claim the portion used for business. Keep records detailing the usage split.
Conclusion
Claiming VAT back UK is a valuable benefit for VAT-registered businesses. By understanding the rules, keeping proper records, and using approved software, you can maximize your reclaim and ensure HMRC compliance. Don’t leave money on the table—reclaim what’s rightfully yours.
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