What Can I Claim VAT Back On as a Limited Company

If your limited company is VAT-registered, one of the key benefits is the ability to reclaim VAT on business-related purchases. However, knowing exactly what you can and cannot claim VAT back on is essential to stay compliant with HMRC and to make the most of your registration.

This guide explains how VAT reclaims work for UK limited companies, which expenses are eligible, and where businesses often go wrong when submitting their VAT returns.

Understanding VAT reclaims

When your company is VAT-registered, you must charge VAT on most of the goods and services you sell. At the same time, you can usually reclaim VAT paid on goods and services you buy for business use. The VAT you charge customers is known as output tax. The VAT you pay to suppliers is known as input tax. You report both through your VAT return and either pay the difference to HMRC or claim a refund if your input tax exceeds your output tax.

To claim VAT back, the goods or services must be used exclusively or primarily for business purposes. You must also have a valid VAT invoice showing the supplier’s VAT number and the amount of VAT charged.

Common expenses you can claim VAT on

Most everyday business purchases are eligible for VAT recovery, as long as they meet the criteria above.

For example, you can usually claim VAT back on:

• Office supplies such as stationery, printer ink and paper

• Business equipment including computers, phones and tools

• Advertising and marketing costs

• Accountancy and legal fees

• Postage and delivery services

• Website hosting and software subscriptions

• Utility bills for business premises

• Business-related travel costs such as fuel (if your company owns the vehicle), train tickets and accommodation (excluding food)

If your business uses goods or services that are partly personal and partly business-related, you may still claim VAT but only on the business portion. You will need to work out a fair percentage and keep a record of how you calculated it.

Vehicles and fuel

Reclaiming VAT on vehicles and fuel is a common area of confusion.

If your limited company buys a car, you can only reclaim VAT if it is used strictly for business purposes. This means no private use at all, including commuting. This is rare unless the vehicle is a pool car used by multiple employees. If there is any private use, even occasional, you cannot claim VAT on the purchase.

However, if you lease a car, you can usually reclaim 50 percent of the VAT on lease payments if the vehicle is used both for business and personal travel. The same rule applies to fuel, you can reclaim all the VAT if it is used exclusively for business. If fuel is used for both business and private journeys, you must either keep detailed mileage records or use HMRC’s fuel scale charge system.

Pre-registration expenses

You can reclaim VAT on certain goods and services purchased before your company became VAT-registered, as long as they were for business purposes and you still hold or use them.

For goods, you can go back up to four years. For services, the limit is six months. You must have valid VAT invoices and be able to show that the purchases were related to your business activity.

Items you cannot claim VAT on

There are some costs where VAT cannot be reclaimed, even if they relate to your business.

These include:

• Client entertainment, meals or hospitality

• Most business entertainment expenses

• Vehicles bought for personal use

• Non-business purchases

• Employee salaries (as there is no VAT on wages)

• Items without a valid VAT invoice

Food and drink for staff can be claimed in limited circumstances, such as when travelling for business, but general staff meals or entertainment are blocked from VAT recovery.

Keeping proper records

To successfully claim VAT back, you must keep complete records. These include VAT invoices, receipts and business bank statements. Your accounting software should clearly show all VAT inputs and outputs and allow you to generate accurate VAT returns. All records must be stored for at least six years.

Mistakes in VAT claims can lead to HMRC penalties, so it is essential to ensure everything you claim is legitimate and clearly documented.

Final thoughts

A VAT-registered limited company can reclaim VAT on a wide range of business expenses, helping to reduce costs and improve cash flow. However, you must be clear about what qualifies as a business expense, hold valid documentation and understand the rules around personal use.

If you are unsure whether a cost is eligible or how to apportion business and personal use, it is best to check with an accountant or bookkeeper. Making careful and informed claims will keep your VAT returns accurate and avoid problems with HMRC down the line.