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If you are registered for VAT, you can generally claim back VAT on goods and services you buy, but only if those purchases relate to sales you make that are liable for VAT.
This guide explains how to work out which purchases you can reclaim VAT for, how to reclaim it, and what evidence you need. It also explains what happens in the repayment process, including how VAT is repaid to traders who are not based in the UK.
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As long as you are registered for VAT, you can claim VAT back on the purchases you make for your business. In general, you can reclaim the VAT that you pay for purchases - known as input tax - as long as those purchases relate to the goods or services your business sells that are liable for VAT.
This means that you cannot reclaim VAT on purchases that are not for your business, or that relate to goods or services your business sells that are exempt from VAT.
You can normally reclaim the VAT for purchases relating to goods or services you supply where you charge VAT at the standard, reduced or zero rate. You will need to keep all invoices that you receive, for purchases used for your sales, as evidence for your claim. These VAT invoices must have been issued by someone who is registered for VAT.
When you can reclaim VAT and when you can't
VAT rates explained: standard, reduced, zero, exempt
Find out what counts as a valid VAT receipt
If your business only supplies goods or services that are exempt from VAT, then you cannot register for VAT and so cannot claim the VAT back on your purchases.
If you are registered for VAT and pay VAT on goods and services that relate to exempt supplies, you are classed as 'partly exempt'. Provided the VAT you paid that relates to exempt supplies is below a certain amount, it can be recovered in full.
If you supply a mix of exempt and non-exempt goods and services, you cannot reclaim VAT you pay on purchases that relate directly to the supplies of exempt goods or services that you make. However, you may pay some VAT on purchases you make that relate to the running of your whole business, such as rent and office overheads. There are special rules to work out how much of this tax you may reclaim.
VAT-exempt and partly exempt businesses explained
You should normally make reclaims on your VAT Return for the period in which they occur. If you are kept waiting for the evidence, you can claim it within three years of the return.
Find out which transactions belong in which VAT periods
If you generally expect to claim a repayment of VAT each time you submit your return, because you usually pay more input VAT than you charge on your sales, you can choose to make monthly returns where you make 12 returns a year instead of four. You can't do this if your turnover is below the VAT threshold and you registered voluntarily for VAT.
Contact HM Revenue & Customs (HMRC) for more information about switching to monthly returns.
You can work out your business and non-business purchases by asking yourself the following questions:
Leisure activities or hobbies that sometimes provide you with an income are not normally classified as a business for VAT purposes, so you won't be able to reclaim VAT on purchases you make that relate to those activities.
If you buy services that are for both business and non-business activities, you will need to apportion the VAT. This means you have to calculate what proportion of the service is used by your business and reclaim the VAT on that amount.
For example, if you pay £100 in VAT on a service you buy, and you calculate that a quarter of that service is used for your business, you can reclaim £25.
In some very limited circumstances, you can reclaim all the VAT incurred on services and then account for the cost of using the services for private or non-business purposes in each tax period by adding this to your output tax. If you need more information about this, contact the VAT Helpline.
If you buy goods for both business and non-business use, you can either carry out a one-off apportionment of the VAT or reclaim it all, accounting for the cost of using the goods for private purposes in each tax period by adding this to your output tax.
This means that if you pay £100 in VAT on goods you buy and you calculate that a quarter is used for your business, you can reclaim £100 as input tax and add £75 to your output tax.
Find out how to apportion VAT in mixed business-private use
If the VAT you're reclaiming is more than the VAT you've charged on your sales, your return will show an amount owing to you, and you may be due for a repayment of VAT. Any repayment will be paid directly into your bank account, but before HMRC make a payment, they follow a number of steps:
HMRC aims to authorise payment of at least 90 per cent of correct repayment returns within ten working days of their receipt. However, repayment can sometimes take longer. It is recommended that you only contact HMRC if you haven't heard anything after 30 days.
You can check how much VAT you owe and the payments you have made under 'Your HMRC Services' in the VAT online services. You can view details for the last 15 months of:
If you’ve already signed up for the Business Tax Dashboard, you can also view your liabilities and payment there.
Read more about HMRC’s Business Tax Dashboard
If you have a legitimate claim for repayment but HMRC doesn't authorise your repayment within 30 calendar days of receiving your VAT return, you may be due compensation, known as repayment supplement. If your return is received before the end of the accounting period, the 30 day period will not start until the end of the period. This is because you are not entitled to any input tax claimed on the return until the end of the accounting period. When HMRC calculates the time taken to authorise your payment, they can deduct the time taken to make reasonable enquiries to be satisfied that your claim is legitimate and accurate, and to correct any errors or omissions on your return. If certain conditions are met and a repayment supplement is due, it will be paid automatically, directly into your bank account, when HMRC authorises payment of your return. You will not receive repayment supplement if:
The repayment supplement is 5 per cent of the amount claimed on your return or £50, whichever is the greater. If your repayment is exceptionally delayed, HMRC may make an extra payment too.
If you keep VAT invoices and other evidence of VAT payments made, you may be able to reclaim VAT on taxable goods and services you paid for before registering for VAT.
Find out more about reclaiming VAT on purchases made before VAT registration
After you cease trading and de-register, HMRC may allow you to reclaim VAT on the supply of services that relate to the time when you were registered. The claim must be submitted within three years.
Find out more about de-registering for VAT if you cease trading
Find out about the different options for accounting for VAT
Payment problems: what to do if you have trouble paying VAT
