What Can I Claim VAT Back On as a Limited Company

Learn what expenses your UK limited company can claim VAT back on, including business costs, travel, fuel and pre-registration purchases

As a chartered accountant running my own firm, one of the most common questions I am asked by limited company directors is what they can actually claim VAT back on. In my experience, VAT reclaims are an area where businesses either leave money on the table through caution, or create problems for themselves by reclaiming VAT they should not.

In this article, I want to explain clearly and practically what VAT a limited company can reclaim, when it can reclaim it, and just as importantly, when it cannot. I am writing this in the first person because this is exactly how I explain it to my own clients. VAT is not about pushing boundaries, it is about understanding the rules properly and applying them consistently.

By the end of this guide, you should have a strong working understanding of reclaimable VAT, partial reclaims, common grey areas, and the mistakes I see HMRC challenge most often.

The basic rule for reclaiming VAT

Before diving into specific expenses, it is important to understand the core rule that underpins all VAT reclaims.

A limited company can reclaim VAT on goods and services that are:

  • Purchased for business use

  • Used to make VAT taxable supplies

  • Supported by a valid VAT invoice

If an expense is wholly and exclusively for business purposes, and your company is VAT registered, VAT is usually reclaimable unless there is a specific restriction.

Problems arise when expenses are partly personal, partly business, or fall into categories that HMRC treats differently.

What makes a valid VAT invoice

This is an area that often gets overlooked.

To reclaim VAT, your limited company must hold a valid VAT invoice. A proper VAT invoice should include:

  • Supplier name and address

  • Supplier VAT registration number

  • Invoice date

  • Unique invoice number

  • Description of goods or services

  • Net amount

  • VAT amount

  • Gross amount

  • VAT rate applied

For smaller purchases under £250, a simplified VAT receipt may be acceptable, but it must still show the VAT number and VAT amount.

Without the right paperwork, HMRC can and do disallow VAT reclaims, even where the expense itself is legitimate.

VAT you can reclaim on general business expenses

Most day to day business running costs allow full VAT recovery, provided they are for business use.

Common examples include:

  • Accountancy and bookkeeping fees

  • Legal fees

  • Business consultancy

  • Advertising and marketing costs

  • Website design and hosting

  • Software subscriptions

  • Cloud services and digital tools

  • Office supplies

  • Stationery

  • Postage and courier services

  • Professional subscriptions

  • Training courses related to the business

These are usually straightforward, and I rarely see HMRC challenge them unless there is a personal element involved.

Reclaiming VAT on office costs

Office related expenses are another common area for VAT reclaims.

You can usually reclaim VAT on:

  • Office rent where VAT is charged

  • Business rates if VAT is charged

  • Office furniture

  • Desks, chairs, filing cabinets

  • Printers and office equipment

  • Office repairs and maintenance

  • Cleaning services

If the office is based at home, things become more nuanced, which I will cover later.

VAT on utilities and phone bills

Utilities and communications are common VAT reclaim areas, but they often involve apportionment.

You can reclaim VAT on:

  • Business electricity and gas

  • Water charges where VAT applies

  • Business broadband

  • Business mobile phone contracts

  • Landline phone services

If these services are used partly for personal reasons, such as a mobile phone or home broadband, VAT should be apportioned based on business use. Reclaiming 100 percent VAT on a phone used privately is a common mistake and one HMRC regularly challenges.

Reclaiming VAT on software and digital services

In modern businesses, software costs are a significant expense.

VAT is usually reclaimable on:

  • Accounting software

  • CRM systems

  • Project management tools

  • Email marketing platforms

  • Design software

  • Cybersecurity services

  • Cloud storage

Most UK and EU suppliers charge VAT correctly. However, for overseas suppliers, particularly outside the UK, VAT treatment can be different and reverse charge rules may apply.

VAT on equipment and assets

Limited companies can generally reclaim VAT on equipment used in the business.

This includes:

  • Computers and laptops

  • Monitors and peripherals

  • Servers and networking equipment

  • Machinery and tools

  • Cameras and audio equipment

  • Business specific equipment

The key point is that the equipment must be used for business purposes. If there is significant personal use, VAT recovery may need to be restricted.

Reclaiming VAT on vehicles

Vehicles are one of the most misunderstood VAT areas.

Cars are heavily restricted. In most cases, you cannot reclaim VAT on the purchase of a car unless:

  • The car is used exclusively for business

  • There is no private use at all

  • It is not available for personal use

This is very rare in practice.

VAT is usually reclaimable on:

  • Commercial vehicles such as vans

  • Pickups that meet HMRC payload rules

  • Lorries

  • Motorcycles used for business

VAT on fuel can be reclaimed for business mileage, but this often requires detailed mileage records or use of the fuel scale charge.

VAT on fuel and mileage

There are two common approaches to fuel VAT.

You can:

  • Reclaim VAT only on business fuel using mileage logs

  • Reclaim VAT on all fuel and apply the fuel scale charge

Each method has pros and cons, and in my experience, many small companies are better off reclaiming VAT only on business fuel.

VAT on travel expenses

VAT treatment varies depending on the type of travel.

You can reclaim VAT on:

  • Train tickets where VAT is charged

  • Taxi fares in the UK

  • Car hire

  • Parking charges where VAT is charged

  • Tolls

You generally cannot reclaim VAT on:

  • Bus fares

  • Most rail fares, as they are zero rated

  • Air fares

It is important not to assume VAT applies just because travel was business related.

VAT on hotels and accommodation

VAT on UK hotels and accommodation is usually reclaimable when the stay is for business purposes.

This includes:

  • Hotels

  • Guest houses

  • Serviced apartments

If the stay includes a personal element, VAT recovery should be restricted accordingly.

VAT on meals and subsistence

This is one of the most common problem areas.

VAT on business meals is generally not reclaimable if the meal is classed as business entertainment.

However, VAT can usually be reclaimed on subsistence, such as:

  • Meals when travelling for business

  • Food purchased during overnight stays

  • Staff meals while working away from the normal workplace

The distinction between subsistence and entertainment is critical, and HMRC look closely at this.

VAT and business entertainment

VAT on business entertainment is not reclaimable.

This includes:

  • Taking clients out for meals

  • Hospitality at events

  • Tickets for sporting or cultural events

  • Client drinks and meals

VAT on staff entertainment, such as staff parties, is usually reclaimable within limits.

VAT on training and education

VAT can usually be reclaimed on training costs if the training is directly related to the business.

Examples include:

  • Professional development courses

  • Industry specific training

  • Compliance training

  • Software training

VAT is not reclaimable on training that provides a personal qualification unrelated to the business.

VAT on marketing and advertising

Marketing costs are one of the safest VAT reclaim areas.

VAT is usually reclaimable on:

  • Online advertising

  • Social media ads

  • Print advertising

  • Branding services

  • Design work

  • SEO services

  • PR services

I rarely see HMRC dispute VAT on genuine marketing costs.

VAT on home office expenses

Home working creates complexity.

VAT can potentially be reclaimed on:

  • A portion of home utilities

  • Business phone use

  • Home broadband

The reclaim must be based on reasonable business use, and evidence should be kept. Claiming VAT on mortgage interest is not allowed, and rent VAT is only reclaimable if VAT is actually charged.

VAT on rent and property costs

VAT on rent is only reclaimable if the landlord has opted to tax the property.

If VAT is charged on rent, it is usually reclaimable where the property is used for business purposes.

VAT on property purchases is more complex and often requires specialist advice.

VAT on professional fees

VAT is reclaimable on most professional fees, including:

  • Accountants

  • Solicitors

  • Tax advisers

  • Business consultants

  • HR advisers

These costs are generally straightforward from a VAT perspective.

VAT on imports and overseas purchases

VAT on imported goods is usually reclaimable, but the mechanism depends on how the import VAT is paid.

Postponed VAT accounting now allows many businesses to reclaim import VAT on their VAT return without upfront payment.

VAT on overseas services may fall under reverse charge rules, which affect how VAT is reported rather than reclaimed.

Partial exemption and mixed supplies

If your company makes both VAT taxable and VAT exempt supplies, VAT recovery may be restricted.

Common examples include:

  • Property rental businesses

  • Financial services

  • Education and training providers

Partial exemption calculations can become complex and should be reviewed carefully.

VAT you cannot reclaim

It is just as important to understand what VAT cannot be reclaimed on.

Common examples include:

  • Business entertainment for clients

  • Personal expenses

  • Clothing not branded or protective

  • Fines and penalties

  • Staff travel home to work

  • Most car purchases

  • Medical expenses

Trying to reclaim VAT in these areas often leads to HMRC queries.

Common VAT reclaim mistakes I see

In practice, the same issues come up repeatedly.

These include:

  • Reclaiming VAT without a valid invoice

  • Reclaiming VAT on entertainment

  • Overclaiming VAT on mixed use items

  • Reclaiming VAT on non VAT registered suppliers

  • Assuming VAT applies when it does not

Most VAT penalties arise from carelessness rather than deliberate errors.

How far back can a limited company reclaim VAT

When registering for VAT, you can usually reclaim VAT on:

  • Goods purchased up to four years before registration

  • Services purchased up to six months before registration

The goods must still be owned by the business and used in it.

This can result in significant refunds if handled correctly.

Final thoughts from real world experience

In my opinion, VAT is not about maximising claims at all costs. It is about understanding what your business is entitled to and claiming it confidently and correctly.

A well managed VAT position is one that stands up to scrutiny. If you would be uncomfortable explaining a VAT claim to HMRC, it is probably worth reviewing it before including it.

For limited companies, VAT can be a cash flow advantage when handled properly, but a headache when misunderstood. Taking the time to get it right pays off far more than trying to fix it after HMRC come knocking.