1. What Does It Mean to Claim VAT Back?
If your business is VAT-registered, you can reclaim the VAT you’ve paid on goods and services purchased for business use. This means you can deduct input VAT (the VAT you pay to suppliers) from your output VAT (the VAT you charge customers).
Reclaiming VAT ensures that you only pay HMRC the net VAT amount — improving your cash flow and reducing overall costs.
✅ You can only reclaim VAT on goods and services used exclusively or partly for business purposes and supported by a valid VAT invoice.
2. What You Can Claim VAT Back On
Businesses can typically reclaim VAT on goods and services used for business operations. Common reclaimable categories include:
General Business Expenses
- Stock and inventory for resale
- Business equipment (tools, computers, machinery)
- Office supplies (stationery, printers, desks, chairs)
- Professional services (accounting, legal, consultancy fees)
- Rent, utilities, and maintenance (if VAT is charged and you’re eligible)
- Marketing, website development, and advertising costs
Travel and Transport
- Train, plane, and taxi fares (if used for business)
- Vehicle maintenance and fuel (subject to business-use rules)
- Parking fees and tolls
- Hotel accommodation for business trips
Communication and IT
- Mobile phone and internet bills (if used for business)
- Business software and online subscriptions (CRM tools, accounting platforms)
- IT support services and hardware
Training and Development
- Work-related training courses
- Professional certification programmes
Tip: Always keep VAT receipts for all expenses — card statements alone are not valid evidence for VAT recovery.
3. Partial Use: Business and Personal
If you buy something used for both business and personal purposes, you can only reclaim the business-use portion of the VAT.
Example
If your mobile phone is used 70% for business and 30% for personal, you can reclaim 70% of the VAT on your phone bill.
To support your claim:
- Keep usage logs or bills separating business and private use.
- Apply a reasonable, consistent percentage.
⚠️ HMRC can challenge VAT claims if your percentage appears unrealistic or poorly documented.
4. Motor Vehicles and VAT
VAT recovery on vehicles is one of the most restricted areas.
You Can Fully Reclaim VAT If:
- The vehicle is used 100% for business purposes (e.g., pool cars, delivery vans).
- There is no personal use whatsoever — including commuting.
You Can Partially Reclaim VAT If:
- The car is leased and used partly for private travel — typically 50% of the VAT on lease payments can be reclaimed.
Fuel VAT Options:
- Actual Mileage Method:
- Keep detailed mileage logs showing business journeys.
- Reclaim VAT only on the business portion of fuel costs.
- Fuel Scale Charge Method:
- Reclaim all VAT on fuel but pay a fixed charge based on vehicle emissions.
5. Capital Items and Assets
You can reclaim VAT on capital assets such as machinery, computers, or office furniture — provided they are used for business.
Key Points:
- Reclaim full VAT if the asset is used solely for business.
- For assets used partly for personal reasons, claim only the business-use percentage.
- Assets over £50,000 (excluding VAT) may fall under the Capital Goods Scheme, requiring adjustments over time.
6. VAT on Staff Costs
Some staff-related costs qualify for VAT recovery, while others do not.
Reclaimable VAT
- Staff travel and accommodation for business trips
- Company-paid mobile phone contracts
- Uniforms, protective gear, or branded workwear
Non-Reclaimable VAT
- Staff entertainment (Christmas parties, meals, gifts) — except under specific exempt rules
- Personal employee expenses unrelated to work
Note: If entertainment expenses are provided to non-employees (e.g., clients), VAT is never reclaimable.
7. What You Cannot Claim VAT Back On
Certain expenses are ineligible for VAT recovery. These include:
- Non-business or personal expenses
- Client entertainment (meals, events, gifts)
- Second-hand goods bought from non-VAT-registered sellers
- Exempt business activities (e.g., financial services, property rentals)
- Items without valid VAT invoices
You cannot reclaim VAT on goods or services not used directly for business purposes, even if you pay for them through the company.
8. Valid VAT Invoice Requirements
To reclaim VAT, your invoice must meet HMRC’s valid VAT invoice criteria.
A Valid Invoice Must Include:
- Supplier’s name and address
- Supplier’s VAT registration number
- Invoice date and unique invoice number
- Description of goods or services supplied
- VAT rate applied and total VAT amount
- Your business name and address
If any of these details are missing, HMRC can disallow your claim.
Frequently Asked Questions (FAQs)
Can I claim VAT before registration?
Yes. You can reclaim VAT on:
- Goods: Up to 4 years old, still in use for the business after registration.
- Services: Up to 6 months before registration.
Can I claim VAT on meals and entertainment?
No, VAT on client entertainment is not recoverable. Staff entertainment is only reclaimable under specific limited circumstances.
Can I claim VAT on imported goods?
Yes. You can reclaim VAT using:
- Your C79 import VAT certificate, or
- Postponed VAT accounting via your VAT return.
What if I make exempt sales?
If your business makes both taxable and exempt sales, you’ll be partially exempt — meaning you can only reclaim VAT on the taxable portion of your costs.
Is VAT reclaim automatic?
No. You must record the VAT on your VAT return and maintain supporting invoices and records.
Can I reclaim VAT on fuel for a personal vehicle?
Only on the business-use portion, supported by accurate mileage or expense records.
Conclusion
Knowing what you can claim VAT back on is essential to maximise recoveries and maintain compliance with HMRC regulations.
✔ Always request and keep valid VAT invoices.
✔ Record and justify partial-use claims accurately.
✔ Use postponed VAT accounting for imports to streamline reclaims.
If in doubt, consult your accountant or HMRC guidance to ensure your VAT claims are compliant and optimised for your business.
For expert VAT advice and audit-proof record keeping,
contact Martin Taggart — your trusted UK business tax specialist.