Understanding how VAT reclaims work can save your business real money
Many UK businesses pay more VAT than they charge — especially when they make large purchases, export goods, or face delayed payments from clients.
If that sounds like your situation, you may be entitled to a VAT refund from HMRC.
Unfortunately, many businesses miss out simply because they don’t realise what can and can’t be reclaimed — or they make small filing errors that delay repayment.
Here’s a clear explanation of how VAT reclaims work in the UK and how to get your refund quickly and correctly.
What Is a VAT Reclaim?
A VAT reclaim is when your business has paid more VAT on purchases than it has collected on sales during a VAT period.
When that happens, HMRC owes you the difference.
You’ll see this figure in Box 5 of your VAT return — if it’s negative, you’re due a refund.
When Can You Reclaim VAT?
You can reclaim VAT on most business expenses, as long as they’re wholly and exclusively for business use and you have a valid VAT invoice.
Typical items you can reclaim VAT on:
- Goods or materials used for your trade
- Business rent and utilities
- Office supplies, equipment and software
- Professional fees (accountants, solicitors, consultants)
- Vehicle running costs and fuel (if not on the Flat Rate Scheme)
You can also reclaim VAT on imports and EU purchases if you follow the correct procedures and have supporting documentation.
When You Can’t Reclaim VAT
HMRC doesn’t allow VAT reclaims on:
- Entertainment costs for clients or suppliers
- Personal or mixed-use expenses
- Non-business use of company vehicles
- Purchases with missing or invalid VAT invoices
- Items used to make exempt supplies (e.g., certain financial or property services)
If you’re unsure, it’s always safer to ask your accountant before including the claim.
How to Reclaim VAT
VAT reclaims are made automatically through your VAT return.
When preparing your quarterly return:
- Enter all VAT you charged customers (output VAT).
- Enter all VAT you paid on purchases (input VAT).
- If input VAT exceeds output VAT, you’re due a refund.
- Submit the return via Making Tax Digital (MTD) software.
HMRC will process your refund once the return is submitted and verified.
Processing time: usually 10 working days, though it can take longer if HMRC needs to check your records.
Common Reasons VAT Refunds Are Delayed
- Missing or incorrect invoices
- Errors in VAT codes or figures
- Mismatched information between software and HMRC systems
- Large refund claims triggering HMRC review
- Using the wrong VAT scheme (e.g., Flat Rate, where input VAT reclaims are restricted)
If your refund is delayed, HMRC may contact you for copies of invoices or additional evidence before releasing payment.
Special VAT Reclaim Situations
a. Pre-registration VAT
You can reclaim VAT on goods and services purchased before you registered for VAT, if:
- Goods were bought up to four years before registration and are still used in the business.
- Services were bought up to six months before registration.
b. VAT on Overseas Expenses
UK businesses can sometimes reclaim VAT paid in other countries via the EU VAT refund scheme or Overseas VAT refund process, depending on where the expense occurred.
c. Bad Debt Relief
If you’ve paid VAT on a sale but your customer never pays, you may reclaim that VAT through Bad Debt Relief rules, usually after six months of non-payment.
How Accountants Speed Up VAT Reclaims
Professional accountants ensure your VAT refund isn’t held up or rejected by HMRC.
At AccounTax Zone, our VAT team helps you:
- Check every transaction for reclaim eligibility
- Review invoices and digital records for errors
- File VAT returns accurately under MTD
- Respond quickly to HMRC refund queries
- Identify missed VAT you can reclaim from past periods
Our goal is simple — to help you get back every penny you’re entitled to without unnecessary delays.
Keeping Records for VAT Reclaims
HMRC requires businesses to keep VAT records for at least six years.
These include:
- VAT invoices and receipts
- Import/export documentation
- VAT return copies and supporting schedules
Keeping clear, digital records ensures smooth VAT reclaims and minimal HMRC scrutiny.
Summary
VAT refunds and reclaims aren’t just for large companies — many smaller businesses are eligible too.
By keeping accurate records and filing correctly, you can recover VAT on your legitimate business expenses and improve your cashflow.
If your VAT account often ends up in a refund position or you’re unsure what you can claim, it’s worth getting professional guidance.
At AccounTax Zone, we help London and UK-wide SMEs manage VAT refunds, file reclaims accurately, and handle any HMRC queries with confidence.
