1. What Does It Mean to Claim Back VAT?
Claiming back VAT (Value Added Tax) means reclaiming the VAT you’ve paid on business-related purchases and expenses. If you’re a VAT-registered business, you’re entitled to recover this VAT by submitting a VAT return to HMRC.
2. Who Can Claim Back VAT?
To claim VAT, you must:
- Be registered for VAT with HMRC
- Use the goods or services for business purposes only
- Keep proper VAT records and invoices
- Submit VAT returns accurately and on time
If you’re not VAT-registered, you cannot reclaim VAT.
3. What Can You Claim VAT Back On?
- Office equipment and supplies
- Tools, machinery, and technology
- Business travel and accommodation (some limits apply)
- Utility bills used in a business premises
- Marketing, software, and professional services
- Vehicles (in specific cases, such as for commercial use only)
4. What Can’t You Claim VAT Back On?
- Personal expenses or purchases not related to the business
- Business entertainment (meals, hospitality)
- Items with no VAT charged (e.g., exempt goods)
- Vehicles used for both business and personal use (unless 100% for business)
Always check if VAT is charged and recoverable on the purchase.
5. How to Claim Back VAT: Step-by-Step
Step 1: Register for VAT
Register with HMRC online if your taxable turnover exceeds the threshold (or voluntarily if under it).
Step 2: Keep Proper VAT Records
Save all VAT invoices and receipts. Ensure they include the supplier’s VAT number, date, and amount charged.
Step 3: Use Compatible Accounting Software
HMRC’s Making Tax Digital (MTD) rules require most businesses to use digital software like QuickBooks, Xero, or Sage to keep VAT records and submit returns.
Step 4: Complete Your VAT Return
Every quarter, complete your VAT return to HMRC via MTD-compatible software. Include:
- VAT charged on sales (output VAT)
- VAT paid on purchases (input VAT)
- The difference is either paid to or reclaimed from HMRC
Step 5: Submit and Await Refund or Pay
Once submitted, HMRC processes the return. If reclaimable VAT exceeds what you owe, HMRC issues a refund—usually within 10 working days.
6. How Often Can You Claim VAT?
VAT returns are usually filed quarterly, but you can apply for monthly returns if you expect regular VAT refunds.
7. Common Mistakes to Avoid
- Claiming VAT on non-business or mixed-use items
- Not keeping digital records or valid VAT invoices
- Missing return deadlines (which leads to penalties)
- Not updating details when circumstances change
Always double-check calculations before submission.
Frequently Asked Questions
Q1: Can I claim VAT on old purchases?
Yes—up to 4 years for goods and 6 months for services before VAT registration, if they’re still used for your business.
Q2: Do I need a VAT invoice to claim?
Yes. A valid VAT invoice is essential for most claims.
Q3: How long does it take to get a VAT refund?
Typically within 10 working days of submitting your VAT return.
Q4: Can I claim VAT back as a sole trader?
Yes, if you’re VAT-registered and the expenses are business-related.
Q5: What if I made a mistake in my VAT return?
You can correct small errors in your next return or inform HMRC directly for larger issues.
Q6: Can I claim VAT if my customers are outside the UK?
Yes, VAT rules vary based on exports and services—check HMRC guidance for specific scenarios.
Conclusion
Knowing how to claim back VAT correctly can save your business significant money. With proper records, digital tools, and a clear understanding of what qualifies, VAT reclaims become a routine part of your financial management.