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Getting a VAT refund from HM Revenue & Customs

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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How you can claim VAT back

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 which are not for your business, or which 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 charged at the standard, reduced or zero rate of VAT. 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

Reclaiming VAT if you supply exempt goods or services

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 goods and services explained

When you can claim

You should normally make reclaims on your VAT return for the period in which they occur. If you are waiting for evidence, you can claim it within three years of the return.

Read our guide to which transactions belong in which VAT periods

If you generally expect to claim repayment of VAT, 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 us for more information about switching to monthly returns.

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Working out business and non-business purchases

You can work out your business and non-business purchases by asking yourself the following questions:

  • Am I supplying goods or services in exchange for payment?
  • Is it a frequent occurrence?
  • Is it an ongoing activity?

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.

Apportioning VAT on services between business and non-business 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. Contact us on Tel 0845 010 9000 for more information about this.

Apportioning VAT on goods between business and non-business activities

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.

Apportioning VAT in mixed business-private use

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How VAT is repaid

If the VAT you're reclaiming is more than the VAT you've charged on your sales, your VAT 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 we make a payment, we follow a number of steps:

  1. When you submit your VAT return, we first register the date on which we receive the return.
  2. Then we carry out automated credibility checks. The majority of returns pass these checks and proceed immediately for payment.
  3. If our automated credibility checks select your return for further investigation, it will then be checked manually. It might be resolved and passed for payment by the VAT Operations staff.
  4. If any queries can't be resolved by VAT Operations staff, your return will be passed to a local audit centre. Staff at local audit centres give a high priority to these checks, and try to answer any queries with the minimum involvement or inconvenience to your business. They may be able to authorise the claim immediately, or may arrange to visit you to check the return.
  5. Once a claim has been accepted, repayment is made by direct payment into your bank account.

We aim to authorise payment of at least 90 per cent of correct repayment returns within ten working days of their receipt.

Repayment supplement

If you have a legitimate claim for repayment but we don'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 we calculate the time taken to authorise your payment, we 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 we authorise payment of your return. You will not receive repayment supplement if you send your return late, you have missing returns for earlier periods at the time your return is received or have made errors on your return which reduce the net tax claimed by more than 5 per cent or £250 whichever is the greater.

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, we may make an extra payment too.

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Reclaiming for the period prior to VAT registration

If you keep VAT invoices and other evidence of VAT payments made, you can 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

Reclaiming after you cease trading and de-register

After you cease trading and de-register, we 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

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Repayments of VAT to overseas traders

If you are in business and visit the UK in the course of your business, you may be able to get back some of the VAT you pay during your visit. The rules are different depending on whether you are from outside the EU, or are a business in registered for VAT in another member state.

Refunds of VAT for EU businesses visiting the UK

If you are registered for VAT in another European Union (EU) member state and visit the UK in the course of your business, you may have to pay VAT on purchases of goods and services during your visit, and you may be able to reclaim it. You can use form VAT 65 to make your claim, and there is more information on what you can claim, and how to make your claim, in VAT notice 723.

There is a strict time limit for submitting your completed application. The due date is 30 June in the year following the year in which the tax was incurred.

Refunds of VAT for UK businesses visiting another EU member state

If you are registered for VAT in the UK and visit another EU member state in the course of your business, you may have to pay VAT on purchases of goods and services there, and you may be able to reclaim it.

You can read more about the rules for different member states and how to make a claim in VAT notice 723. You can obtain a claim form VAT 66 by sending an email, or by writing to the address in notice 723.

Refunds of VAT for non-EU businesses visiting the UK

If you are a business outside the EU and visit the UK in the course of your business, you may be able to reclaim the VAT paid on purchases of goods and services that you make during your visit. You can use form VAT 65 to make your claim, and there is more information on what you can claim and how to make your claim in VAT notice 723.

There is a strict time limit for submitting your completed application. The due date is 31 December for claims in the 12 months up to 30 June of that year.

Penalties for incorrect claims

You may be charged a penalty if you don’t take reasonable care to make sure your claim is correct, and you make an error that means you ask for too large a refund. These penalties can apply to claims made after 1 July 2008 for businesses outside the EU, and 1 January 2009 for businesses within the EU.

Find out more about penalties for errors in claims for VAT refunds (PDF 53K).

Go to form VAT 65 - Application by a business person established in the community for refund of VAT

More about VAT refunds for EU businesses in VAT Notice 723

More about VAT refunds for non-EU businesses in VAT Notice 723

More useful links

Find out about the different options for accounting for VAT

Payment problems: what to do if you have trouble paying VAT

More about repayments in VAT Notice 700/58

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