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Reclaiming VAT: Claiming VAT Back

When reclaiming VAT there are some items you can claim for and others you cannot reclaim. This guide explains how to claim VAT back on business purchases and expenses.

VAT RECLAIM RULES UK: They govern what you can and cannot reclaim.

In most cases you can claim back the total portion of Value Added Tax paid out. That is providing the goods or services you purchased are for use ‘only‘ in the business.

But, the rules change if you use the purchases for personal or private use as well. In this case you can only reclaim the business part of the VAT that you paid out. For example:

  • Half the calls made on a mobile phone are private. So, you claim back 50% VAT on the phone purchase price and 50% VAT on its service plan.

In all these cases you must keep VAT records to support any claim. The records need to show how the business proportion qualifies for claiming VAT back. That means you must have received a valid VAT invoice as part of the transaction.

Purchases You Cannot Reclaim VAT

The accounting process allows for reclaiming VAT on vehicles and fuel costs. You can also claim back VAT paid for staff travel. But, there are certain items where reclaiming VAT is not permitted. They include:

  • Any items used ‘solely‘ for private or personal use (including business entertainment costs).
  • Most goods or services that a business uses to make VAT exempt supplies.
  • Certain goods sold to your business under one of the VAT second-hand margin schemes.
  • Business assets transferred to you or your business as a going concern.
  • Most items bought from other EU countries. But, the electronic cross-border refund system may mean you can reclaim VAT.

Claiming VAT on Purchases Before Registration

In some cases you can reclaim VAT paid on goods or services that you bought before you became registered. But, the purchases made before VAT registration have certain time limitations for claiming.

VAT on Partially Exempt Business

You must make separate calculations for purchases relating to both ‘VAT exempt‘ and ‘taxable supplies‘. Examples could include your business accountancy fees and phone bill.

Business Assets £50,000 (and over)

Reclaiming VAT: Claiming VAT Back in the United KingdomSpecial rules apply when reclaiming VAT on capital assets such as:

  • Aircraft, boats, and ships that cost £50,000 or more (before VAT).
  • Buildings and land which cost 250,000 or more (before VAT).
  • Individual computers and single pieces of computer equipment if they cost £50,000 or more (before VAT).

Note: The Capital Goods Scheme can adjust the VAT reclaimed on expensive items over several years.

How are VAT Refunds Paid?

Once you log in to your HMRC Government Gateway online account you can see any VAT refund owed to you. You then make a claim by submitting your VAT Return.

You will need to give your account details to HMRC. This applies even when you have already set up a direct debit for your VAT Returns. You can add or change them by going into the registration details section in your VAT online account.

A VAT refund usually takes 10 days once HMRC receive your return (sometimes longer). They recommend waiting 30 days before contacting HMRC if you still do not hear anything.

Reclaiming VAT: Rules on Claiming VAT Back (business) in the United Kingdom