Can Businesses Claim Back VAT? How to Reclaim VAT in the UK (2026/27)
Quick answer
Yes. Businesses can claim back VAT if they are VAT-registered and the purchase is used for business. You reclaim it on your VAT return by deducting the VAT you paid on costs from the VAT you charged customers. You need a valid VAT invoice, and some costs, such as client entertaining and most cars, are blocked.
Last reviewed: [INSERT REVIEW DATE] · Written by Marina Jahan · Reviewed by Shamayun Chowdhury, ACMA, CMA
When your business buys stock, software or equipment, a sixth of the price you pay is often VAT. Over a year, that can add up to thousands of pounds.
Can businesses claim back VAT on all of it? This guide answers that directly, then explains who qualifies, what you can and cannot reclaim, how to claim, and how far back you can go.
Can businesses claim back VAT? The short answer
Can businesses claim back VAT? Yes, provided they are registered for VAT with HMRC. Registered businesses recover the VAT they pay on business purchases, known as input VAT, through their regular VAT return.
Can businesses claim back VAT without registering? No. If you are not VAT-registered, the VAT simply becomes part of the cost of what you buy. This catches out many new owners who expect VAT back on their first laptop or van.
How reclaiming VAT works
A VAT-registered business deals with two kinds of VAT. Output VAT is what you charge your customers. Input VAT is what you pay your suppliers. On each VAT return, you take one from the other:
- If output VAT is higher, you pay the difference to HMRC.
- If input VAT is higher, HMRC pays the difference to you.
So you rarely “claim back VAT” as a separate application. Reclaiming VAT happens automatically when you record your purchases and submit the return. Our guide to input and output VAT explains the two sides in more detail.
When you reclaim more than you owe
A return where input VAT is bigger than output VAT is called a repayment return. It is common for businesses selling zero-rated goods, such as most food, or after a large one-off purchase. HMRC usually pays a repayment within about 10 days of receiving the return, although it may run checks first, especially on a first claim or an unusually large one.
Which businesses can claim back VAT?
So can businesses claim back VAT whatever their structure? Yes. Sole traders, partnerships and limited companies all follow the same core rules, as long as they are VAT-registered.
VAT-registered vs not registered
You must register for VAT once your taxable turnover goes over £90,000 in any rolling 12-month period, or if you expect it to go over that figure in the next 30 days alone. Below the threshold, you can choose to register voluntarily. That lets you reclaim VAT, but you must then add VAT to your own sales and file returns using Making Tax Digital software.
Can sole traders claim back VAT?
Yes, if they are VAT-registered. Being a sole trader makes no difference to the rules. The registration does. A sole trader below the threshold who has not registered cannot reclaim any VAT, even on clearly business purchases. If you are asking “can I claim VAT back as a sole trader?”, the first question to answer is whether registering would leave you better or worse off.
What can a limited company claim VAT back on?
A VAT-registered limited company can reclaim VAT on costs bought in the company’s name for its taxable business: stock, equipment, software, rent, utilities and professional fees, for example. It cannot reclaim VAT on directors’ personal spending, even if the company paid for it. Section 2 lists what qualifies and what is blocked.
Accountant insight: Voluntary registration usually pays off when your customers are VAT-registered businesses, because they can reclaim the VAT you charge. If you sell mainly to the public, adding 20% to your prices can cost you more in lost sales than you gain from reclaiming VAT. Run the numbers before you register.
What can businesses claim back VAT on?
Can businesses claim back VAT on everything they buy? Not quite. You can reclaim VAT on goods and services bought for your taxable business, as long as a supplier charged you VAT and you hold the right evidence.
| Cost | Can you reclaim the VAT? | Points to note |
|---|---|---|
| Stock and raw materials | Yes | Goods you resell or use to make products |
| Equipment, tools and computers | Yes | Apportion if also used privately |
| Software and subscriptions | Yes | Check the supplier actually charged UK VAT |
| Rent on business premises | Sometimes | Only if the landlord charges VAT |
| Utilities, phone and broadband | Yes, business share | Home-based businesses claim only the business part |
| Accountancy and legal fees | Yes | For business matters, not personal ones |
| Vans and commercial vehicles | Yes | Including repairs and running costs |
| Fuel | Yes, with conditions | Private use of a car means extra rules (see below) |
| Advertising and marketing | Yes | Gifts to customers have their own limits |
If you are asking “what can I claim VAT back on?”, the short rule is: business costs where VAT was actually charged. Purchases from suppliers who are not VAT-registered, or zero-rated and exempt goods, carry no VAT to recover.
The VAT invoice rule
To reclaim VAT, you normally need a valid VAT invoice showing the supplier’s name, address and VAT number, the date, a description of what you bought and the VAT charged. A bank statement or card slip alone is not enough. For purchases of £250 or less, including VAT, a simplified invoice such as a till receipt that shows the VAT number and rate is usually acceptable.
What businesses cannot claim back VAT on
Can businesses claim back VAT on client lunches or a new car? No. Some costs are blocked by law, however business-related they feel, and knowing them is the easiest way to avoid errors.
- Client entertaining. You cannot reclaim VAT on meals, drinks or events for clients and other non-employees. Staff entertaining, such as a team party, is usually reclaimable. See our guide to VAT on entertaining.
- Buying a car. VAT on a car is blocked unless it is used only for business and not available for private use, as with a driving school or taxi. This applies to electric cars too. If you lease a car with some private use, you can usually reclaim 50% of the VAT on the lease payments.
- Private use. Personal spending is never reclaimable, and mixed-use items must be split.
- Costs linked to exempt sales. If you make exempt sales, such as certain financial or insurance services, the VAT on related costs is normally not recoverable.
Fuel for cars with private use
If a business car is also used privately, you have three choices: reclaim all the fuel VAT and pay a fuel scale charge, reclaim VAT only on business mileage using records, or reclaim no fuel VAT at all. The right choice depends on how many private miles you drive.
Mixed-use costs and partial exemption
Can businesses claim back VAT on a phone used for work and home? Yes, but only the business share, with a note of how you worked it out. Businesses that make both taxable and exempt sales are “partly exempt” and must split their input VAT. If the VAT linked to exempt sales is small, under a de minimis limit, it can usually be reclaimed in full.
Flat Rate Scheme users
Can businesses claim back VAT on the Flat Rate Scheme? Generally, no. You pay a fixed percentage of your turnover instead of tracking VAT on each purchase. The main exception is a single capital asset, such as equipment, costing £2,000 or more including VAT, which can be reclaimed through the normal rules. Check our guide to the VAT Flat Rate Scheme to see whether it still suits you.
Accountant insight: The most common error we correct is VAT reclaimed on client lunches or on the purchase of a director’s car. Both are blocked, and both are easy for HMRC to spot. Code these costs as “no VAT” in your software from the start.
How to claim VAT back: step by step
So how do you claim VAT back once the answer to “can businesses claim back VAT?” is yes? The process is routine: record each purchase, add up the VAT and include it on your next VAT return through Making Tax Digital software.
Step 1: Keep a valid VAT invoice for every purchase
Save the invoice or receipt as soon as you pay. Check that it shows the supplier’s VAT number and the VAT charged. Without it, the claim may not stand up if HMRC asks.
Step 2: Record purchases in MTD-compatible software
All VAT-registered businesses must keep digital records and file through software that works with Making Tax Digital. Enter each cost with the correct VAT rate, or let a bank feed pull it in and match the receipt. Mark blocked items, such as client entertaining, as “no VAT”.
Step 3: Total your input VAT for the period
At the end of each VAT period, usually a quarter, your software adds up the VAT on purchases. This figure goes in Box 4 of the return. The VAT you charged customers goes in Box 1.
Step 4: Submit the return by the deadline
The return and any payment are normally due one calendar month and seven days after the end of the period. Box 5 shows the difference: a payment due to HMRC, or a repayment due to you.
Step 5: Receive your repayment
If Box 4 is bigger than Box 1, HMRC repays the difference to the bank account it holds for your VAT registration. Keep those bank details up to date in your business tax account, or the payment will be delayed.
Worked example (illustrative)
Amira runs a VAT-registered joinery business. In one quarter she invoices £30,000 plus £6,000 VAT. She also buys a new machine and materials costing £42,000 plus £8,400 VAT. Her return shows £6,000 in Box 1 and £8,400 in Box 4, so Box 5 is a repayment of £2,400. Could she claim it without registering? No: she would recover none of that £8,400.
Our VAT return guide explains how to reclaim VAT box by box.
How far back can businesses claim back VAT?
How far back can businesses claim back VAT? It depends on whether the cost came before or after you registered. Pre-registration costs have their own time limits, and missed VAT after registration can normally be claimed for up to four years.
Pre-VAT registration expenses
Can businesses claim back VAT on costs from before they registered? Often, yes:
- Goods: bought up to four years before registration, as long as you still have them, or they were used to make goods you still have.
- Services: bought up to six months before registration.
The purchases must relate to the business you are now registering, and you still need the VAT invoices. Claim them on your first VAT return. This rule is a key reason to register as soon as you can: costs that fall outside these windows are lost.
Correcting missed input VAT
If you forgot to claim VAT on a purchase after you registered, you can normally still claim it within four years of the due date of the return for the period it belongs to. Small corrections can usually be made on your next return. That applies if the net error is under £10,000, or up to £50,000 if it is no more than 1% of your Box 6 turnover. Larger errors must be reported to HMRC separately, using form VAT652.
Accountant insight: New businesses often lose money by registering late, then forgetting about claiming VAT back on pre-registration costs. Before your first return, list every business purchase from the past four years (goods) and six months (services), and check which you still hold invoices for.
Not registered yet? Our guide on how to register for VAT walks you through it.
Can businesses claim back VAT: FAQs
Can businesses claim back VAT if they are not registered?
No. Only VAT-registered businesses can reclaim VAT. Without registration, VAT is simply part of your costs.
Can businesses claim back VAT without a receipt?
Generally not. You need a valid VAT invoice, or a simplified one for purchases of £250 or less.
Can I claim VAT back on a van?
Yes. Vans and other commercial vehicles are treated as business assets, so the VAT is normally reclaimable.
How long does HMRC take to repay VAT?
Usually around 10 days after receiving your return, but checks on new or large claims can take longer.
Can I reclaim VAT on purchases made before registering?
Yes, within limits: goods bought up to four years earlier that you still hold, and services from the last six months.
Can I claim VAT on a client lunch?
No. Business entertainment of clients is blocked. Staff entertaining is usually allowed.
Does a repayment return trigger an HMRC check?
Not always, but HMRC may ask for invoices, especially on a first or unusually large claim. Keep your records ready.
Can I claim VAT back on the Flat Rate Scheme?
Only on single capital assets costing £2,000 or more, including VAT.
Final verdict: can businesses claim back VAT?
Can businesses claim back VAT? Yes, if they are VAT-registered, the cost is for the business, and they hold a valid VAT invoice. The claim is made through the normal VAT return, and costs such as client entertaining and most cars are blocked.
Register on time, claim pre-registration costs on your first return, and review missed VAT before the four-year limit closes. Small errors add up quickly, so it pays to have someone check your returns.
Your next steps
- Check whether you are, or should be, VAT-registered.
- Gather VAT invoices for pre-registration and missed purchases.
- Set blocked costs to “no VAT” in your software.
Not sure how much VAT you can recover?
Major Accountancy can review your purchases, prepare your VAT returns and check whether your business can claim back VAT it has missed.
About the author and reviewer
Written by Marina Jahan
Senior Content Strategist, SEO and Marketing Specialist · Major Accountancy Ltd
Marina writes plain-English guides to UK tax and VAT from GOV.UK and HMRC sources. [ADD: years of experience and any relevant qualification, only if held.]
Technically reviewed by Shamayun Chowdhury
BA (Hons), MSc, ACMA, CMA, CIPFA (Affil), MAAT, AATQB
Senior Accountant, Leicester · Director, Major Accountancy Ltd · Lecturer, Nottingham Trent University · 15+ years’ UK practice
Checked against GOV.UK in October 2026. General information, not personal tax advice.