Chapter 4

Claiming back VAT

VAT-registered businesses can claim back the VAT they pay on business expenses. Let’s learn how.

Money changing hands

Published Wednesday 22 September 2021

When you can claim VAT back

You can claim VAT back when:

  • you’ve purchased goods or services for your business
  • a customer leaves you with a bad debt

VAT on business expenses

When you buy something for your business, you’re usually charged VAT. If you’re registered for VAT, you can claim that back. You do this by reporting how much VAT you paid during a period of time. HMRC balances the amount you’ve paid against the VAT you’ve collected to work out your refund or bill (learn more in working out your VAT).

Business expenses include things like stock, work tools, computers, phones, and stationery. You can’t claim VAT on client entertainment.

When expenses are split between business and home

If you buy something like a laptop that you use at home and in the business, you can claim part of the VAT back. You will need to work out what portion of the purchase is business-related and show how you arrived at that number.

When you’re not collecting any VAT

You can claim back VAT on supplies even if the end product or service that you sell is 0% VAT rated. But you can’t claim VAT back if the end product or service is VAT exempt.

VAT relief on bad debts

If you raise an invoice and pay VAT on the expected income but your customer doesn’t pay you, then you have a bad debt. You can claim back the VAT from HMRC on your next return. If the customer pays later, you can repay the VAT then.

Learn more about VAT and bad debts

Disclaimer

Xero does not provide accounting, tax, business or legal advice. This guide has been provided for information purposes only. You should consult your own professional advisors for advice directly relating to your business or before taking action in relation to any of the content provided.

VAT Guide For Business

Making a start with VAT? Want to know more about how MTD for VAT impacts you? This guide will help you get sorted.

  1. What is VAT and how much is it?

    You’ve probably heard about VAT before – it stands for Value Added Tax and is added onto prices in the UK.

  2. Registering for VAT

    Find out if your business needs to worry about VAT. And if so, learn how to register for VAT.

  3. Calculating VAT and issuing VAT invoices

    If you’re a VAT-registered business you must add VAT to your prices. You also need to issue VAT invoices. Find out how.

  4. Claiming back VAT

    VAT-registered businesses can claim back the VAT they pay on business expenses. Let’s learn how.

  5. Working out your VAT refund or payment

    Working out VAT is simple maths. Keeping track of all your transactions is the tricky part. Let’s learn the process.

  6. Filing VAT return through Making Tax Digital

    Once you’ve registered for VAT, you’ll need to submit returns online regularly – and square up with HMRC. Here’s how.

  7. Tools and guides for your business

    Now you know the ins and outs of VAT, but it can be tough to keep on top of it all. Xero’s got the resources to help.

Download the VAT Guide for Business

Get your VAT sorted. Fill out the form to receive this guide as a PDF.

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Now that you have your guide

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