1. What Is VAT?
Value Added Tax (VAT) is a consumption tax applied to most goods and services in the UK. If you’re a VAT-registered business, you can claim back VAT on business-related purchases and expenses, reducing your overall costs.
2. Who Can Claim Back VAT?
You can claim back VAT if:
- Your business is VAT-registered.
- Purchases are for business use.
- You have valid VAT invoices or receipts.
- The expense is not exempt from VAT (like some financial services or training).
3. What Can You Claim Back VAT On?
Businesses can claim VAT on:
- Office supplies and equipment
- Stock and raw materials
- Travel and fuel costs (business-related only)
- Professional services (accounting, legal, consultancy)
- Utility bills for business premises
4. What Can’t You Claim Back VAT On?
- Personal expenses unrelated to business
- Entertainment costs for clients or staff
- Some vehicles if used privately as well as for business
- Non-VAT registered supplier purchases
5. How Do You Claim Back VAT? Step-by-Step
Step 1: Register for VAT
You must be VAT-registered to claim VAT back. Businesses must register if their taxable turnover exceeds £90,000 (2025 threshold).
Step 2: Keep VAT Records
- Collect and store VAT invoices and receipts.
- Use accounting software or manual logs to track input and output VAT.
Step 3: Complete a VAT Return
- VAT returns are usually submitted quarterly.
- Report:
- Output VAT (VAT you charged customers).
- Input VAT (VAT you paid suppliers).
Step 4: Submit via HMRC
- File your VAT return online through Making Tax Digital (MTD) compatible software.
- If Input VAT > Output VAT, HMRC will refund you the difference.
Step 5: Receive Refund
- Refunds are usually processed within 10 working days after submitting your VAT return.
6. Claiming Back VAT on Past Purchases
You can claim VAT on purchases made:
- Up to 4 years before registration for goods still in use.
- Up to 6 months before registration for services.
7. Common Mistakes to Avoid
- Claiming VAT on personal expenses
- Not keeping valid VAT invoices
- Missing deadlines for returns
- Using the wrong VAT scheme (Flat Rate vs Standard)
- Forgetting to claim back VAT on imports and overseas expenses
Frequently Asked Questions
1. How often can I claim back VAT?
Usually every quarter when you file your VAT return.
2. Can I claim back VAT without a receipt?
No, HMRC requires valid VAT invoices or receipts.
3. How long does it take to get VAT refunded?
Typically 10 working days, but it may take longer in some cases.
4. Can I claim VAT on fuel if I also use the car personally?
Yes, but only for business use. Alternatively, you can use the fuel scale charge method.
5. Can small businesses claim back VAT?
Yes, if registered for VAT—even small businesses can benefit.
6. What happens if I over-claim VAT?
You may face fines, penalties, and interest from HMRC.
Conclusion
To answer how do you claim back VAT—you must be VAT-registered, keep proper records, and submit VAT returns to HMRC through approved software. With the right process, you can recover business expenses legally and improve cash flow.