Charge, reclaim and record VAT

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Reclaim VAT on business expenses

You can reclaim VAT on items you buy for use in your business if you’re VAT registered. Do this in your VAT return.

There are different rules if your organisation is not registered for VAT (for example, a local authority, academy, public body or eligible charity). Read guidance on reclaiming VAT as an organisation not registered for VAT (VAT126).

If any items are also for personal use, you can only claim the business proportion of the VAT.

Examples

Half of your mobile phone calls are personal. You can reclaim 50% of the VAT on the purchase price and the service plan.

You work from home and your office takes up 20% of the floor space in your house. You can reclaim 20% of the VAT on your utility bills.

You must keep records to support your claim and show how you arrived at the business proportion for a purchase. You must also have valid VAT invoices.

If you reclaim VAT on goods or services which you’ve not paid for, you must repay HMRC. This is called ‘clawback’. Read the guidance on clawback to find out when and how to repay VAT you previously reclaimed.

If you sell both taxable and exempt goods

If you sell goods or services that are a mixture of taxable and exempt from VAT, your business is considered ‘partly exempt’. Find out about partial exemption and how to calculate what you can reclaim.

Purchases before registration

You can reclaim VAT paid on goods or services bought before you registered for VAT if you bought them within:

  • 4 years for goods you still have or goods that were used to make other goods you still have
  • 6 months for services

You can only reclaim VAT on purchases for the business now registered for VAT. They must relate to your ‘business purpose’. This means they must relate to VAT taxable goods or services that you supply.

If you use the VAT Flat Rate Scheme

You cannot reclaim the VAT on your purchases - except for certain capital assets over £2,000.

Read section 15 of the guidance on the Flat Rate Scheme for small businesses to find out when you can reclaim VAT.

Vehicles

You might be able to reclaim all the VAT on a new car or commercial vehicle if you use it only for business. You must be able to show that it is not used on a personal basis, for example it’s specified in your employee’s contract.

‘Personal use’ includes travelling between home and work, unless it’s a temporary place of work.

You might also be able to claim all the VAT on a new car if it’s mainly used:

  • as a taxi
  • for driving instruction
  • for self-drive hire

If you buy a used car for business use, the sales invoice must show the VAT.

If you hire a car to replace a company car that’s off the road, you can usually claim 50% of the VAT on the hire charge.

If you hire a car for business use only, you can reclaim all the VAT if you hire it for no more than 10 days.

Fuel costs

There are different ways of reclaiming VAT on fuel, if you do not pay a fixed rate under the Flat Rate Scheme.

You can reclaim all the VAT on fuel if your vehicle is used only for business.

If you use the vehicle for both business and personal purposes, you can either:

  • reclaim all the VAT and pay the right fuel scale charge for your vehicle
  • only reclaim the VAT on fuel you use for business trips - you’ll have to keep detailed mileage records

You might choose not to reclaim any VAT, for example if your business mileage is so low that the fuel scale charge would be higher than the VAT you can reclaim.

If you choose not to reclaim VAT on fuel for one vehicle you cannot reclaim VAT on any fuel for vehicles used by your business.

Additional vehicle costs

You can usually reclaim the VAT for:

  • all business-related running and maintenance costs, like repairs or off-street parking
  • any accessories you’ve fitted for business use

You can do this even if you cannot reclaim VAT on the vehicle itself.

Travel expenses

You can reclaim VAT on employee travel expenses for business trips. Travel expenses can include transport, meals and accommodation that you pay for. Find out who counts as an employee.

You can reclaim VAT on other kinds of expenses (not just those related to travel) for self-employed people who are treated as employees.

You cannot reclaim VAT if you pay your employees a flat rate for expenses.

Business assets of £50,000 and more

There are special rules for reclaiming VAT in the Capital Goods Scheme, which means you must spread the initial VAT claimed over a number of years.

What you cannot reclaim

You cannot reclaim VAT for:

  • anything that’s only for personal use
  • goods and services your business uses to make VAT-exempt supplies
  • the cost of entertaining or providing hospitality to people you do business with (for example theatre or sports tickets)
  • goods sold to you under one of the VAT second-hand margin schemes
  • business assets that are transferred to you as a ‘going concern’
View a printable version of the whole guide

Part of Export goods from the UK: step by step

  1. Step 1 Check if you need to follow this process

    Follow these steps if you're moving goods permanently from:

    • England, Wales or Scotland (Great Britain) to a country outside the UK
    • Northern Ireland to a country outside the UK and the EU

    What you need to do is different if you are:

    1. Learn about exporting, including making export plans, on Business.gov.uk

  2. Step 2 Check the rules for exporting your goods

    1. Check duties, rules and restrictions for your goods in the destination country

  3. and Apply for any licences you need to export your goods

    There are special rules and you may need to get licences or certificates if you are exporting any of the following:

  4. Step 3 Get your business ready to export

    You need an EORI number that starts with GB to export goods from England, Wales or Scotland.

    If you move goods to or from Northern Ireland you may need one that starts with XI.

    1. Get an EORI number
    1. Check if you need to register for VAT

    There are processes that can make clearing customs quicker and easier to manage if you export goods regularly.

    1. Find out about using simplified declaration procedures
    2. Check if you can use Common Transit to move your goods
    3. Check if Authorised Economic Operator status is right for you

  5. and Check whoever's receiving the goods can import them

    The business or person receiving the goods may need:

    • to make an import declaration in their country
    • licences or certificates to receive goods from the UK

    Check whoever you are sending the goods to is able to import them into their country.

  6. Step 4 Decide who will make export declarations and transport the goods

    You can hire someone to deal with customs and transport the goods for you, or you can do it yourself.

    1. Find out how to hire someone to deal with customs for you
    2. Find out how to make export declarations yourself
    3. Find out how to transport goods out of the UK by road

  7. Step 5 Classify your goods

    You must find the right commodity code to classify the goods you're exporting.

    Your customs agent or transporter might be able to help you with this.

    1. Find the right commodity code for your goods

  8. Step 6 Prepare the invoice and other documentation for your goods

    The completed invoice and any licences or certificates must travel with the goods.

    When filling in the value of your goods on the invoice, use the price you’re selling them for. If you're not selling the goods, use the market value of the goods. List any freight or export insurance you included in the price separately.

    You may need proof of origin if exporting to a country where your goods have a reduced or zero rate of duty.

    1. Get proof of origin for your goods

    You might be able to zero rate the goods for VAT. This means you can charge your customers VAT at 0%.

    1. Check if you can zero rate the goods for VAT

  9. Step 7 Get your goods through customs

    If you've appointed someone to deal with UK customs for you, they'll make the declaration and get your goods through the UK border.

    1. Make an export declaration and get your goods cleared by UK customs

    You may need other documentation to get your goods into the destination country. Ask the person or business buying your goods what information you need to provide.

    1. Check how to bring goods back into the UK if they were rejected for import at another country’s border

  10. Step 8 Keep invoices and records

    You must keep commercial invoices and any customs paperwork.

    If you're VAT registered, record the goods in your VAT accounts even if they are zero-rated.

    1. Find out how to record the goods in your VAT accounts

    If you exported controlled goods, for example firearms, keep the paperwork that shows who owns the goods.