How To Claim Your VAT

All the steps you can take in order to claim back VAT.

Updated: May 20, 2024
Matt Crabtree

Written By

Matt Crabtree

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Whether you're just starting a new business or you've been successfully running one for a while now, it goes without saying that there's a decent amount of bureaucracy and organisation when you're dealing with His Majesty's Revenue & Customs.

In particular, one of the more complicated financial challenges of running a business is having to deal with Value Added Tax (VAT).

Any VAT registered businesses in the UK are legally obliged to charge VAT on any sales they make, but the good news, however, is that you're actually able to claim the VAT back for certain goods and services your business has bought — albeit through a fairly convoluted process.

As it's not the simplest of topics to get your head around, we'll be running through all the steps you can take in order to claim back VAT within this article, including a few tips on how you can maximise the amount you're reclaiming.

Still, there are a few basics you'll need to come to terms with before you can understand the process of how to reclaim VAT, so let's run through a quick overview before getting into more specific details.

VAT — An Overview

If you're slightly less familiar with this topic, VAT is essentially a type of consumption tax that's typically levied on any goods and services you might see in the UK.

From the manufacturer to the retailer and to the consumer, this type of tax is normally collected at each stage of the supply chain, and there are different rates for different kinds of goods or services.

For instance, while the standard rate of VAT is currently at 20%, there are still certain things that have reduced rates or even zero rates — the majority of food or children's clothing, for instance.

As it currently stands, you're required to register for VAT if your annual turnover exceeds a certain figure. This figure changes from time to time, but it's currently £85,000. Basically, this means that if your business makes an annual return over that amount, you'll need to charge VAT on anything you sell

Fortunately, though, it's possible to reclaim VAT paid on any of your business expenses, which can be a huge advantage for a lot of businesses looking to save some money.

How much VAT you're actually able to reclaim comes from demonstrating the amount of input VAT your business has paid, so you're going to need to come to HMRC with receipts.

Keeping Accurate Records

Generally speaking, having incredibly detailed records is absolutely paramount if you're looking to reclaim any of the VAT you've paid for your business expenses.

HMRC aren't ever willing to give you the benefit of the doubt with this sort of thing, so organised record-keeping basically ensures that you'll have all the documentation you need to support your claims here.

In practice, this means holding on to valid VAT invoices, so make sure you're never losing track of any of the invoices your business either sends out or receives.

Just for clarity, it's also worth mentioning that a valid VAT invoice needs to include a few important details to ensure that it's both complete and accurate. To get specific, this means things like:

  • The supplier's name and address
  • Your business name and address
  • A unique invoice number
  • The date of supply
  • A description of the goods or services
  • The total amount payable
  • The amount of VAT charged

As mentioned, there's a strong chance you'll be rejected if you try claiming back VAT without having all of these features, so keep this in mind when you're in communication with HMRC.

Obviously, this is an extensive amount of information to provide, so if you're struggling to stay on top of your records, it's always worth investing in some kind of accounting software or even a spreadsheet that'll help document all of your transactions.

Put simply that'll help you calculate all the VAT you've paid and received while also being generally helpful for streamlining the whole process.

Still, while software tools definitely have their own place when it comes to simplifying VAT reclaiming, you've still got to understand the underlying principles.

As such, it's always best to seek advice from a professional who actually specialises in VAT matters rather than trying to breeze through the process yourself — at least for the first time you try reclaiming VAT.

Because they're well versed in this topic, you're ensuring you make the most informed decisions possible when it comes to VAT, not to mention that you're greatly minimising the risk of errors.

Remember, it's not solely about financial savings when you're filing for VAT returns — it's also about maintaining a solid reputation as a VAT-registered business while complying with the law.

Eligibility for VAT Reclaim

As mentioned earlier, not every expense is eligible for VAT reclaiming, so make sure you're focusing on any expenses that directly contribute to your business activities. This includes purchases of goods and services used exclusively for business purposes.

For instance, if your business mileage is quite high due to the number of business trips you or your employees need to take for work, this is something you can claim VAT back on. This is known as the fuel scale charge, but there are other business expenses you can reclaim VAT for, too, such as:

  • Office Supplies
  • Equipment
  • Professional services like accounting and legal fees

The VAT Reclaim Process

To recap, the first step of this process is to gather a list of all your various VAT transactions, from the VAT you've collected from your sales (known as output VAT) to any of the VAT that you've paid on your business expenses (which is input VAT).

After you've got a hold of all the relevant information, the next step is to move over to HMRC's VAT portal, which is located on their website.

From here, you'll want to access your online account for VAT and look for the VAT return form. This is where you'll be inputting all the figures from the documents that you gathered earlier, listing your input VAT specifically.

As we've already mentioned, it's absolutely paramount here that you're being accurate and that all of the numbers that you're inputting match the information that's on your invoices. Although it's frustrating how delicate and unforgiving this process is, even the smallest of discrepancies can lead to delays or even rejections, so take your time here.

Once you've finally submitted your return, HMRC will review the data that you've provided for accuracy before ultimately processing your claim. This part can take a bit of time to process, so try to stay patient while you're waiting for them to get in touch.

Remember, punctuality plays a big role here, too. You can receive penalties if you don't adhere properly to the deadlines, so don't hesitate to contact HMRC's support line if you encounter any particular complexities during the process.

And that should be it! Reclaiming your VAT is certainly an intricate process, but once you've performed this process a few times, you'll come to terms with it and ultimately secure some valuable savings for your business.

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