1. What Is VAT and When Can You Claim It Back?
Value Added Tax (VAT) is a consumption tax charged on goods and services in the UK. If you’re a VAT-registered business, you can usually reclaim the VAT paid on eligible business expenses.
You can claim back the VAT on:
- Goods and services used wholly for business purposes
- Some partially business-related expenses (with adjustments)
- Imports and purchases from EU and non-EU countries
2. How Much VAT Can You Claim Back?
The standard VAT rate is 20%, so if an item cost £120 including VAT, you can claim back £20. Here’s how the basic calculation works:
VAT amount = (Total cost including VAT ÷ 120) × 20
For example:
If you bought a laptop for £600 including VAT:
VAT = (£600 ÷ 120) × 20 = £100
You can claim the full £100 VAT back if the laptop is for business use only.
3. What Can You Claim VAT Back On?
Eligible expenses include:
- Office supplies and equipment
- Business travel (excluding fuel for private use)
- Marketing and advertising
- Subcontractors and professional services
- Mobile phones and internet (if used for business)
Even some pre-registration purchases (up to 4 years for goods and 6 months for services) are claimable.
4. What You Cannot Claim VAT Back On
You cannot reclaim VAT on:
- Business entertainment (e.g., client meals)
- Personal expenses
- Items with mixed use unless apportioned
- Second-hand items bought from non-VAT-registered individuals
- Employee salaries
Always keep a valid VAT invoice for proof.
5. Claiming Partial VAT: Mixed-Use or Partial Exemption
If an expense has both business and personal use (e.g., a phone), you can only claim VAT on the business portion. Estimate a reasonable split and keep records.
For partially exempt businesses (like charities or education), VAT claims may be restricted based on business vs. exempt activities.
6. How to Claim VAT Back
You reclaim VAT by submitting a VAT Return—usually every quarter. Use HMRC’s Making Tax Digital (MTD) compliant software to:
- Report VAT charged on sales (output tax)
- Report VAT paid on purchases (input tax)
- Pay or reclaim the difference
If your input tax exceeds your output tax, you’ll get a VAT refund.
7. Common VAT Claim Mistakes to Avoid
- Claiming VAT on pro forma or invalid invoices
- Forgetting to exclude personal elements
- Claiming VAT on non-VATable or exempt items
- Not keeping receipts or digital records
- Using incorrect VAT rates
Avoid these to stay compliant and reduce audit risk.
8. Flat Rate VAT Scheme: What’s Different?
If you’re on the Flat Rate Scheme, you cannot reclaim VAT on most purchases, except for capital assets over £2,000.
You pay a fixed % of turnover instead of tracking every input/output VAT item.
Frequently Asked Questions
Q1: How far back can I claim VAT?
Up to 4 years for goods and 6 months for services from your VAT registration date.
Q2: Can I claim VAT on fuel or mileage?
Yes, but only for business mileage. You may use flat-rate fuel scale charges or actual receipts.
Q3: What if my supplier isn’t VAT registered?
You cannot reclaim VAT from non-registered suppliers, even if they charged it in error.
Q4: Can I claim VAT without an invoice?
No. A valid VAT invoice is required for all claims.
Q5: What happens if I claim too much VAT?
You must correct the error or face penalties and interest if audited by HMRC.
Q6: Can I reclaim VAT on international purchases?
Yes, if the supplier charged VAT and the purchase relates to UK business activity. Import VAT may also be claimable.
Conclusion
Knowing how much VAT you can claim back helps improve cash flow and maintain compliance. As long as your purchases are for business use and properly documented, you can reclaim the full or partial VAT. Stay organized, use digital accounting tools, and double-check your VAT returns to claim everything you’re entitled to.