What Is VAT and Who Can Claim It Back?
Value Added Tax (VAT) is a consumption tax charged on most goods and services sold in the UK. Businesses registered for VAT can reclaim VAT on eligible business expenses, while some overseas businesses may also qualify for refunds under specific rules.
Although foreign tourists once could reclaim VAT when leaving the UK, this scheme ended in 2021 — though some limited tax-free shopping options remain.
Who Is Eligible to Reclaim VAT?
UK VAT-Registered Businesses
Businesses registered for VAT in the UK can reclaim VAT on goods and services purchased for business purposes.
Overseas Businesses
Foreign companies may apply for a VAT refund through HMRC if:
- They are not based in the UK,
- They incurred UK VAT for business-related expenses, and
- Their country has a reciprocal VAT refund agreement with the UK.
Non-UK Visitors
The UK’s Retail Export Scheme has been withdrawn, meaning most tourists cannot reclaim VAT on purchases taken out of the country. However, a few retailers still offer VAT-free shopping via third-party refund operators.
How VAT Refunds Work for UK Businesses
To reclaim VAT, your business must:
- Be VAT-registered.
- Hold valid VAT invoices for all business expenses.
- Submit quarterly VAT returns through HMRC’s Making Tax Digital (MTD) system.
- Enter your reclaimable VAT in Box 4 of your VAT Return.
HMRC will either refund the amount owed or deduct it from your next VAT payment. Refunds are typically processed within 10 working days.
What Expenses You Can Reclaim VAT On
UK businesses can generally reclaim VAT on:
- Business-related travel, accommodation, and meals.
- Office supplies and IT equipment.
- Professional services (legal, accounting, consulting).
- Utilities such as gas, electricity, and broadband.
- Company vehicles and related costs (with some restrictions).
- Staff training and subscriptions to business tools.
Ensure all expenses are for genuine business use and supported by valid VAT invoices.
What You Cannot Reclaim VAT On
HMRC rules prohibit reclaiming VAT on:
- Personal expenses.
- Client entertainment and hospitality.
- Business gifts over £50.
- Some car-related expenses for personal use.
- Purchases without valid VAT invoices.
Making incorrect claims can lead to fines, penalties, or HMRC audits.
How to Reclaim VAT on Your Return
Follow these steps to reclaim VAT correctly:
- Collect and verify VAT invoices from suppliers.
- Record expenses accurately in your accounting system.
- Submit your VAT Return through MTD-approved software.
- Enter reclaimable VAT under Box 4 of your return.
- Await your refund or offset confirmation from HMRC.
Refunds are typically credited within 10–14 days if no issues arise.
VAT Refunds for Overseas Businesses
Overseas businesses can claim UK VAT back if they meet eligibility criteria.
Requirements:
- The business is not UK-registered or based in the UK.
- Expenses relate to UK business activities (e.g. exhibitions, trade shows, or suppliers).
- The business’s home country has a mutual refund agreement with the UK.
How to Apply:
- Complete Form VAT65A.
- Submit original VAT invoices and proof of payment.
- Send the form to HMRC, VAT Overseas Repayment Unit, Newcastle.
Applications must be submitted by 30 June following the calendar year of the expense.
Documents Required for VAT Reclaims
Keep and provide:
- Valid VAT invoices with supplier VAT numbers.
- Proof of payment (receipts, bank statements).
- VAT registration certificate (for businesses).
- Import/export documents if applicable.
- Proof of business use, such as travel itineraries or contracts.
Organised records are essential, especially if HMRC audits your business.
Deadlines for VAT Refund Claims
- UK Businesses: Claim VAT in each VAT Return (usually quarterly).
- Foreign Businesses: Submit claims by 30 June of the following year.
Late or incomplete applications may be rejected.
Tips to Maximise Your VAT Refunds
- Use cloud accounting software such as Xero or QuickBooks.
- Keep digital copies of all receipts and invoices.
- Separate personal and business expenses.
- Check invoices for missing VAT numbers or incorrect details.
- Consult a VAT specialist or accountant for large or complex claims.
Being meticulous ensures accuracy and helps prevent HMRC disputes.
Frequently Asked Questions (FAQs)
Can individuals get VAT refunds in the UK?
Only in rare cases, such as for specific export purchases. VAT refunds mainly apply to VAT-registered businesses.
How long does a VAT refund take?
Usually within 10 working days after filing your VAT Return.
Can I claim VAT without a valid invoice?
No. HMRC requires a valid VAT invoice showing the supplier’s VAT number.
What happens if I claim VAT incorrectly?
You may need to repay the amount and could face penalties or interest.
Is it worth registering for VAT?
Yes, if your annual turnover exceeds the £90,000 threshold (2025) or your input VAT regularly exceeds output VAT.
Can overseas companies claim VAT on UK expenses?
Yes, provided they meet eligibility requirements and submit Form VAT65A correctly.
Conclusion
Reclaiming VAT in the UK is a valuable way to reduce business costs and improve cash flow. Whether you’re a UK company or an overseas business, keeping clear records and submitting timely claims ensures compliance and maximises refunds.
For fixed-fee legal help with your case,
contact Martin Taggart — your trusted UK legal partner.