Reclaiming VAT: How Input Tax Works in 2026/27

Reclaiming VAT means deducting eligible VAT paid on business purchases—called input tax—from the VAT charged on sales, called output tax. A VAT-registered business normally makes the calculation through its VAT Return.

If output tax exceeds recoverable input tax, the business pays the difference to HMRC. If recoverable input tax exceeds output tax, HMRC will normally repay or credit the difference, subject to checks.

How VAT reclaiming works

Assume a VAT-registered business charges £2,000 of output VAT to customers during a return period. It also incurs £1,250 of eligible input VAT on business costs. The VAT Return produces a net payment of £750:

• output VAT: £2,000;
• less recoverable input VAT: £1,250;
• net VAT payable: £750.

If the eligible input VAT had instead been £2,300, the return would show a potential £300 repayment.

What VAT can be reclaimed?

VAT can generally be reclaimed where the registered business receives a taxable supply for use in making taxable business supplies and holds suitable evidence. Typical examples may include:

• stock and raw materials;
• professional services;
• commercial rent where VAT is validly charged;
• equipment, software and office costs;
• qualifying business travel and accommodation;
• advertising and marketing; and
• certain pre-registration purchases.

Recovery always depends on the facts. Read who can reclaim VAT for the eligibility tests.

What cannot normally be reclaimed?

HMRC restricts or blocks input tax on several categories, including:

• private or non-business expenditure;
• most cars unless an exception applies;
• business entertainment for UK clients and prospects;
• costs relating directly to exempt activities;
• VAT incorrectly charged by the supplier; and
• costs without valid supporting evidence.

Mixed-use costs must normally be apportioned. Partly exempt businesses may need a partial-exemption calculation, and some capital assets remain subject to later adjustments.

What evidence is required?

A valid VAT invoice is the standard evidence for input tax. It normally shows the supplier’s VAT number, invoice date and number, customer details where required, description, net value, VAT rate and VAT amount.

A receipt that contains the required simplified-invoice information can support lower-value expenditure. A payment-card or bank statement alone is not normally enough because it does not establish the VAT treatment.

Which VAT Return boxes are involved?

For a standard UK VAT Return:

• Box 1 normally records VAT due on sales and other outputs;
• Box 4 records VAT reclaimed on purchases and other inputs, including qualifying import VAT;
• Box 5 shows the net VAT payable to HMRC or reclaimable from HMRC.

Other boxes record the net values of sales, purchases and relevant cross-border transactions. Businesses should follow the detailed VAT Return guidance because postponed import VAT, reverse charges and special schemes can affect the entries.

When should VAT be reclaimed?

Input tax is normally included in the period covering the supplier’s tax point when the business also holds the required evidence. If the invoice arrives later, HMRC’s VAT Notice 700 says the input tax should be claimed for the period in which the evidence is received.

Cash Accounting Scheme users generally reclaim input tax when the supplier has been paid. If a valid claim was omitted from the correct return, correction rules and a four-year statutory time limit can apply.

Pre-registration VAT

After registering, a business may be able to reclaim qualifying VAT incurred before the effective registration date. HMRC’s general limits are:

• up to four years for qualifying goods still held, or incorporated into goods still held; and
• up to six months for qualifying services relating to the registered business.

The business must meet all conditions, retain evidence and exclude costs already consumed or relating to non-taxable activities.

VAT reclaims and Making Tax Digital

VAT-registered businesses generally keep digital records and submit returns through compatible software under Making Tax Digital. The accounting records should show the supplier, date, net value, VAT rate and input tax claimed, together with any adjustment or apportionment.

Repayment checks

HMRC may check a repayment return before releasing funds. Common questions concern unusually large purchases, first returns, property or vehicle claims, duplicate invoices, the business purpose and whether the supplier’s VAT number is valid. Keep contracts, invoices, payment evidence and calculations so the claim can be explained promptly.

Common mistakes

• claiming the gross cost instead of the VAT amount;
• claiming VAT where the purchase was zero-rated or the supplier was not VAT registered;
• using a pro-forma invoice instead of a valid VAT invoice;
• failing to restrict private or exempt use;
• claiming client-entertainment VAT;
• duplicating an invoice; and
• posting the claim to the wrong return period.

Frequently asked questions

Is reclaiming VAT the same as receiving a refund?

Not always. Input tax is first offset against output tax. A cash repayment generally arises only where eligible input tax exceeds the VAT due.

How long does a business have to reclaim missed input tax?

HMRC’s general time limit is four years from the due date of the return on which the business first became entitled to deduct it, subject to the correction rules.

Can VAT be reclaimed without an invoice?

HMRC can consider alternative evidence in limited circumstances, but businesses should not assume a bank statement is sufficient. Obtain a valid VAT invoice wherever possible.

Official guidance

See HMRC VAT Notice 700 and VAT Notice 700/12. Both should be checked for later amendments before submitting a material or unusual claim.