What you can and can't reclaim VAT on

This guide explains when you can reclaim VAT and when you cannot reclaim VAT. Generally, you can reclaim the VAT that you pay when you buy goods or services for your business. This VAT is called input tax by HM Revenue & Customs (HMRC).

You can reclaim input tax on your purchases regardless of whether the goods or services your business sells are standard, reduced or zero-rated for VAT. You will need all of the required documentation, such as VAT receipts, to be able to reclaim the input tax that you have paid. You cannot reclaim VAT on goods and services that are used for non-business activities. Generally, you cannot reclaim VAT paid on any items related to goods or services you sell that are exempt from VAT, although there are exceptions.

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When you can reclaim VAT

Generally, you can reclaim VAT that you pay when you buy goods or services for your business. This VAT is called input tax by HMRC.

You can reclaim VAT on your purchases regardless of whether the goods or services your business sells are standard, reduced or zero-rated for VAT.

You will need to keep all of the required records, such as VAT receipts, to be able to reclaim VAT.

VAT rules in relation to business expenses sometimes differ from income tax rules in relation to business expenses. Therefore you should not assume that you can reclaim VAT on an item just because it is an allowable expense for Income Tax or Corporation Tax purposes.

Get information about products and services where VAT is charged

Read about the different rates of VAT

Find out about keeping records, invoicing and accounting for VAT

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Reclaiming VAT on items bought before being registered for VAT

You may be able to reclaim the VAT that you have paid on goods or services that you have bought prior to your VAT registration.

Find out what you can reclaim from the period prior to being VAT registered

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When you cannot reclaim VAT

There are a number of situations where you cannot reclaim VAT that you have paid.

You cannot reclaim VAT paid for goods and services that are used for non-business activities. This includes:

  • goods and services that are bought for your personal use
  • cars that are not used exclusively for business purposes (and any fitted accessories and delivery)
  • goods and services for non-business use bought by charities or not-for-profit organisations

Get information about apportioning VAT in mixed business-private use

Read our guide to VAT on cars and motoring expenses

Find out more about VAT for charities and other not-for-profit organisations

You also cannot reclaim VAT on the following business expenses.

Generally, you cannot reclaim VAT paid on any items related to goods or services you sell that are exempt from VAT, although there are exceptions.

Get information about exempt and part exempt sales

VAT cannot usually be reclaimed on business entertainment expenses.

Get information about VAT and business entertainment expenses

You cannot reclaim VAT when you pay for goods or services to be supplied direct to your customer. However, in this situation the VAT may be claimable by your customer if they are VAT registered.

VAT cannot be reclaimed when you buy items such as second-hand goods, art, collectibles and antiques. However, in this situation, the margin schemes for VAT apply.

Find out about the margin schemes for VAT

You cannot reclaim VAT on items that you have bought from suppliers in other European Union (EU) states. You may be able to claim the VAT back from the relevant VAT body in those states.

Get information about VAT for international traders

You cannot reclaim VAT on assets of a business that are transferred to you as a going concern.

More about VAT when a business is sold

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What is 'business' and what is 'non-business'?

You can only reclaim VAT on goods and services you buy for your business.

You are in business if you supply goods or services in exchange for payment, and this is a frequent occurrence and an ongoing activity.

You are not in business if you occasionally receive income from sources such as leisure activities or hobbies.

Reclaiming VAT on goods that are used both for business and non-business

If you use an item for both business and non-business purposes such as a computer, you can only reclaim VAT on the proportion of the item that you use for your business.

Get information about apportioning VAT in mixed business-private use

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More useful links

More about input tax and reclaiming VAT in VAT Notice 700

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