How To Get a VAT Refund: A Guide for UK Businesses

Introduction

Value-added tax – commonly known as VAT – is a 20% surcharge payable on many goods and services bought in the UK. In many cases, your business can reclaim the cost using the government’s VAT refund scheme. 

It sounds pretty straightforward, but there are a number of things to bear in mind before you get started. You’ll need to navigate a list of rules and exceptions, including whether your company is based in the UK or overseas (we have a separate guide on that here). 

In this article, we’ll answer some of the most commonly asked questions from UK businesses about VAT refunds. 

UK VAT refunds explained

If you run a business based in the UK, you may be able to claim back (or clawback) VAT on a range of purchases. You can also claim for things you buy in similar tax regimes overseas, including the EU.

How can I claim a UK VAT refund?

First things first: to reclaim VAT on items you’ve bought for use in your business, you have to be VAT registered. You can do this by submitting a VAT return. 

Next, make a claim by submitting a VAT65A form to HMRC – the UK's tax, payments and customs authority. You can do this either online using HMRC’s Secure Data Exchange Service (SDES) system, or by post.

What can I claim for? 

VAT can be reclaimed for goods and services that are bought in the UK, but they must be used for the purpose of running your business. If this includes shared personal use, you can only claim for the business part of it. You can claim for:

• Accommodation
• Meals
• Travel – such as fares and fuel (see below)
• Trade fairs

There’s a lot of detail here, such as claiming for self-employed people who are treated as employees, so be sure to investigate for yourself – or seek professional advice.

What can’t I reclaim VAT for? 

You are not eligible for VAT relief for goods and services bought if they are: 

• Entirely for personal use
• For resale 
• For business entertainment, unless specifically for your employees
• Used by your business to make VAT-exempt supplies 
• Under a VAT second-hand margin scheme
• Business assets transferred to you as a ‘going concern’

In many cases, VAT can’t also be reclaimed on buying a car. But it’s complicated... 

Can I claim VAT on buying, hiring or running a car? 

You can claim 50% of the VAT charged for hiring or leasing a car, so long as it includes business use. If you hire a car for this purpose for no more than 10 days, you can reclaim 100% of the VAT. 

It’s also worth remembering that, contrary to popular belief, ‘personal use’ usually includes travelling between home and work. 

There are also specific rules for business owners and employees claiming back VAT on fuel for company cars. Most simply, you can reclaim all the VAT on fuel if your vehicle is used only for the business.

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

• Reclaim all the VAT, adjusted for the appropriate fuel scale charge for your vehicle
• Reclaim only the VAT on fuel you use for business trips – but you’ll have to keep detailed records

The fuel scale charge is based on HMRC’s mileage allowance. Every 3 months, it calculates redemption rates based on the size of the vehicle and distance travelled. You can use them: 

• To reimburse employees for business travel in company cars
• For employees who need to repay the cost of fuel used for personal travel

You do not have to reclaim VAT on fuel. However, if you choose not to for one vehicle in your fleet, you cannot claim for any of them. 

You can also often reclaim the VAT for all business-related maintenance and running costs. This includes repairs, off-street parking, or accessories fitted for business use. Remember, you can do this even if the vehicle itself is not eligible for VAT relief.

Is there a limit on how much and when I can claim?

There is no maximum limit on how much you can claim. The minimum depends on when you do it, but is either £16 or £130. See below.

How far back can I claim?

Your VAT claim should cover a period of at least 3 months, but no more than the full prescribed year. If it’s less than 12 months, the total claim must be at least £130. For claims applying to a whole calendar year (or the remainder of a calendar year if it’s less than 3 months) the minimum amount you can claim is £16.

You can also include items you previously missed, but they must relate to VAT charged in the calendar year of the claim.

What is the deadline for claiming a VAT refund?

Your claim must be submitted no later than 6 months after the end of the year, which runs from 1 July to 30 June. That means the deadline is 31 December the same year​ you made your purchase.

How long does a VAT refund take?

HMRC will pay any refunds due within 30 days of receiving your claim, unless more information is required. Payment will be made directly to your nominated bank account. If there isn’t one, HMRC will send you a cheque, also known as a payable order.

What happens if my claim is refused?

If your claim is refused, HMRC will provide an explanation. If you’re unhappy with the outcome, you can request a review of the decision, or appeal to an independent tribunal​.

It’s also worth noting that incorrect claims can result in HMRC requiring repayment of any overpaid VAT, plus potential penalties for false claims – even if it’s by accident.

Can I claim on VAT overseas?

It’s not just in the UK that you can reclaim VAT. Domestic businesses can also clawback their VAT abroad. As you might expect, what you can claim varies from country to country. In many cases, as part of your claim you’ll need to provide a VAT66 certificate of status, which proves you are trading in the UK. 

Though the refund process is harmonised across the EU, many countries will only grant you a refund if the UK offers similar arrangements for non-native businesses.  

As a result, it makes sense to use some kind of expense management tool to help manage risk as well as reduce admin, making sure you keep your capital where it belongs – in your business. 

An automated expense management tool can help 

An automated expense management tool like Mobilexpense can help businesses with their VAT refunds in a variety of ways – saving you time, hassle and money. Here’s some of the benefits:

Automated Receipt Capture and Storage
Mobilexpense allows users to capture receipts using their mobile devices, storing them digitally. This ensures that all necessary documentation for VAT claims is readily available and easily accessible.

Compliance with VAT Regulations
Mobilexpense ensures that all expense entries comply with the latest VAT regulations by automatically categorising expenses and calculating the correct VAT amounts, reducing the risk of errors and non-compliance penalties.

Simplified VAT Reclaim Process
The tool identifies which expenses are eligible for VAT refunds and generates the necessary reports for submission to HMRC, simplifying the reclaim process.

Time and Cost Savings
Automating the expense management process reduces time spent on manual entry and calculations, allowing businesses to focus on more strategic tasks and minimising the risk of costly mistakes and delays in VAT refund processing.

Real-Time Expense Tracking
Mobilexpense provides real-time tracking and reporting of expenses, giving businesses a clear overview of their VAT liabilities and reclaim opportunities, aiding in timely submission of VAT claims and better cash flow management.

Integration with Accounting Systems
The tool integrates with existing accounting and ERP systems, ensuring that expense data flows seamlessly into the financial system. This integration helps maintain accurate financial records and simplifies the auditing process.

Global VAT Compliance
For businesses operating internationally, Mobilexpense supports VAT compliance across multiple jurisdictions, adhering to local VAT rules and regulations.

User-Friendly Interface and Mobile Accessibility
With a user-friendly interface and mobile accessibility, employees can easily submit their expenses on-the-go, ensuring timely submissions and up-to-date expense records.

Detailed Reporting and Analytics
Mobilexpense offers detailed reporting and analytics features, providing insights into spending patterns and identifying areas for potential savings. These reports are also useful for preparing VAT claims and ensuring that all eligible expenses are claimed.

Support for Complex VAT Scenarios
Mobilexpense can handle complex VAT scenarios, such as partial exemptions and multiple VAT rates, ensuring businesses maximise their VAT reclaim potential without missing any eligible claims.

Conclusion

Navigating the VAT maze can be a time-consuming – and potentially expensive – journey. Take the extra effort to make sure you’ve met all the requirements for your claim, and have receipts and calculations available to hand to help respond to any queries from HMRC as quickly as possible. Also, if you haven’t done so already, now could be a good time to start using a reliable tool to help simplify the process, so you can get back to doing what you do best: running your business.

Book a demo to understand how you can take the next step in becoming a master of expense complexities.