What you can and cannot reclaim
You can usually reclaim the VAT paid on goods and services purchased for use in your business.
If a purchase is also for personal or private use, you can only reclaim the business proportion of the VAT.
Half of your mobile phone calls are private. 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.
From 1 April 2019, most businesses will need to keep digital VAT records and use software to submit VAT Returns.
What you cannot reclaim
You cannot reclaim VAT for:
- anything that’s only for private use
- goods and services your business uses to make VAT-exempt supplies
- business entertainment costs
- anything you’ve bought from an EU country (you may be able to reclaim VAT charged under the electronic cross-border refund system)
- goods sold to you under one of the VAT second-hand margin schemes
- business assets that are transferred to you as a going concern
Purchases before registration
You may be able to reclaim VAT paid on goods or services bought before you registered for VAT if the purchases were made within certain time limits.
Partly exempt businesses
You need to make separate calculations for purchases that relate to both VAT-exempt and taxable supplies, such as phone bills or accountancy fees.
Business assets of £50,000 and more
There are special rules for reclaiming VAT for:
- individual computers and single pieces of computer equipment costing £50,000 or more before VAT
- aircraft, ships and boats costing £50,000 or more before VAT
- land and buildings costing £250,000 or more before VAT
You may need to adjust the amount of VAT you reclaim over several years using the Capital Goods Scheme.
How your VAT refund is repaid
Claim your refund by submitting a VAT Return.
You need to give your account details to HM Revenue and Customs (HMRC) - even if you’ve already set up a Direct Debit for VAT Returns. Add or change them by going to the registration details in your VAT online account.
You can also use your online account to view any refund you’re owed, unless you’ve signed up for ‘Making Tax Digital for VAT’.
You will usually get your refund within 10 days of HMRC receiving your return but it may take longer. Only contact HMRC if you have not heard anything after 30 days.