VAT Reclaims: How to Claim Back VAT on Purchases

How Input VAT Recovery Works

When you're VAT-registered, you charge VAT on your sales (output tax) and pay VAT on your purchases (input tax). On each VAT return, you offset your input tax against your output tax. If you've paid more VAT on purchases than you've charged on sales, HMRC refunds the difference.

This system means VAT is only a cost to the final consumer. For businesses in the supply chain, it should be neutral — provided you claim back what you're entitled to.

What You Need to Reclaim VAT

A Valid VAT Invoice

To reclaim input VAT, you must hold a valid VAT invoice from your supplier. A valid invoice must include:

• The supplier's name and address
• The supplier's VAT registration number
• A unique invoice number
• The date of supply and the date of the invoice
• Your name and address (for invoices over £250)
• A description of the goods or services
• The quantity of goods (where applicable)
• The rate of VAT and the VAT amount
• The total amount including and excluding VAT

Simplified invoices (for supplies under £250) need less detail but must still show the supplier's VAT number and the VAT-inclusive total.

Important: A till receipt from a VAT-registered business can count as a simplified VAT invoice if it shows the supplier's VAT number and the total including VAT.

Business Purpose

The goods or services must be used for your business. Personal purchases don't qualify, even if you're VAT-registered. Mixed-use items qualify for the business proportion only.

Taxable Supplies

You can only reclaim input VAT if you use the purchased goods or services to make taxable supplies (standard-rated, reduced-rate, or zero-rated). If you make only exempt supplies, you can't reclaim input VAT at all.

Common Items to Reclaim VAT On

• Office equipment and technology
• Business software subscriptions
• Professional services (accountants, solicitors)
• Business insurance
• Marketing and advertising
• Business travel (train tickets, hotels)
• Fuel (business proportion)
• Office supplies and stationery
• Trade tools and equipment
• Raw materials and stock
• Business mobile phone costs

Items Where VAT Cannot Be Reclaimed

• Client entertainment — blocked regardless of valid invoices
• Non-qualifying cars — VAT on most car purchases is not reclaimable (unless the car is used 100% for business with no private use, which is rare)
• Purchases from non-VAT-registered suppliers — no VAT to reclaim
• Personal purchases — not business expenditure
• Exempt supplies you make — if you make exempt supplies, input VAT attributable to them is not reclaimable

Pre-Registration Reclaims

When you first register for VAT, you can reclaim VAT on:

• Goods purchased up to 4 years before registration (provided you still have them and they're used in your business)
• Services purchased up to 6 months before registration

This is a valuable one-off benefit. Check your purchase invoices from before registration and claim what you can.

Tips for Maximising Your Reclaims

1. Always get a VAT invoice. If a supplier doesn't provide one automatically, ask for it.
2. Check supplier VAT numbers. If you're reclaiming VAT, verify the supplier is genuinely VAT-registered.
3. Don't forget about pre-registration claims.
4. Claim the business proportion of mixed-use items.
5. Keep all invoices for at least 6 years.

With Accounted, Penny automatically identifies reclaimable VAT on your purchase invoices and includes it in your VAT return. She'll also flag purchases where a VAT invoice is missing so you can request one from the supplier.

Reclaim every penny of VAT you're entitled to. Start your free trial with Accounted.