For many small business owners in the UK, VAT can feel time-consuming and frankly confusing. Yet understanding how to reclaim VAT can save your business money and improve cash flow.

So if you're asking yourself “what can I claim VAT back on as a limited company?”, this guide will take you through everything you need to know, from VAT registration rules to the practical steps for making your claim correctly.

What is VAT and how does it work for small businesses?

VAT is a tax added to most goods and services in the UK. If your business sells goods or services above the VAT threshold (currently £90,000 in turnover), you must register for VAT with HMRC. Once registered, you’re responsible for charging VAT on relevant sales, known as output VAT, and you can reclaim VAT you pay on business expenses, known as input VAT.

The principle is simple: you pay VAT on your purchases, charge VAT on your sales, and the difference goes to HMRC. If you pay more VAT on your purchases than you charge your customers, HMRC will refund the difference.

Do you need to register to claim VAT?

Before claiming VAT back, your Limited Company must be VAT registered. There are two main conditions when businesses register for VAT.

1. Mandatory registration.

 Your taxable turnover in the past 12 months is more than £90,000 or you expect to exceed £90,000 in the next 30 days. 

2. Voluntary registration

Your turnover is below the threshold, but you make the choice to register voluntarily. This can be beneficial if you mainly sell to VAT-registered businesses and incur significant VAT on purchases.

VAT registration comes with obligations, including submitting VAT returns, keeping digital records under Making Tax Digital (MTD), and following HMRC rules. Once registered, you will be issued a VAT number to use on invoices and when reclaiming VAT.

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What can you claim VAT back on as a Limited Company?

If you're wondering “what can I claim VAT back on as a limited company?”, the general rule is that VAT can be reclaimed on goods and services purchased for business purposes if registered on the Standard rate scheme.

Office supplies and equipment

Stationery, computers, printers, software, and office furniture can usually be reclaimed where they are used for business purposes.

Examples:

• A laptop purchased exclusively for work.
• Stationery needed for sending out mail to customers.
• Office chairs and desks used by employees.

Stock and raw materials

If your Limited Company buys goods for resale or raw materials for manufacturing, the VAT on these purchases can usually be reclaimed. However, it cannot be reclaimed on goods or services used for personal use, even if purchased through the business.

Examples:

• Retail stock for a shop.
• Raw materials for a production line.
• Components for assembly in a manufacturing business. 

Professional services

VAT paid to accountants, legal advisers, IT consultants, or marketing agencies can be reclaimed, provided you receive a valid VAT invoice showing the supplier’s VAT number and the VAT amount charged.

Examples:

• Accountants and bookkeepers.
• Legal services.
• IT consultants.
• Marketing agencies.

Vehicle and travel costs

VAT on travel and vehicles can be reclaimed in certain situations:

• Travel expenses for business trips are reclaimable where VAT has been charged. Most UK public transport, such as trains and buses, is zero-rated, meaning there is no VAT to reclaim. UK domestic flights are generally standard-rated, while international flights are zero-rated.
• VAT on the purchase of a car is reclaimable only if the vehicle is used exclusively for business purposes, with no private use at all.
• If a company leases a car, it can usually reclaim 50% of the VAT on lease payments, even where there is private use.
• VAT on fuel can be reclaimed either by claiming only the business proportion (with mileage records) or by reclaiming all VAT and applying the HMRC fuel scale charge.

Private and business travel must be clearly separated.

Business premises costs

VAT on costs related to commercial premises may be reclaimed, including rent (where VAT is charged), utilities, and repairs.

If your business operates from home, VAT must be apportioned to reflect the business-use percentage only.

Subscriptions and software 

Business subscriptions and software are often essential for running a company. VAT on these items can be reclaimed if they’re for business use. 

Examples:

• Accounting software (like Crunch!).
• Cloud storage services.
• Online business tools.
• Industry publications. 

As with equipment, if these services are partly for personal use, only the business portion can be reclaimed. 
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What can’t you claim VAT back on as a small business?

While you may be focused on the question of “What can I claim VAT back on as a Limited Company?”, you should also make sure you understand what can’t be reclaimed. Claiming VAT incorrectly can lead to HMRC investigations or fines and penalties, so understanding the rules properly is important. 

HMRC allows VAT to be reclaimed only on goods and services used for business purposes. Where there is any private use, VAT must be apportioned accordingly, or in some cases is not able to be reclaimed at all. 

To note if you are registered on the Flat rate scheme, VAT can only be reclaimed on expenses in limited situations and there is a separate way to make additional savings from the VAT instead.

Personal expenses

Goods or services purchased for personal use cannot have VAT reclaimed.

This includes:

• Ordinary clothing (unless protective or branded workwear).
• Personal electronics that are mainly used outside the business.
• Holidays, personal meals, or non-business subscriptions.

Food and drink

VAT on food and drink is not automatically reclaimable. Whether you can claim it depends on who it is for and the reason it is provided.

Staff subsistence during business activities

VAT can usually be reclaimed on reasonable subsistence costs incurred by employees while travelling for business purposes. This includes meals purchased during a business trip or while working away from their normal place of work.

Food for resale

If your business purchases food or drink to sell to customers, such as catering supplies or retail stock, the VAT can normally be reclaimed.

Vehicles and transport

VAT rules around vehicles are one of the trickiest areas for small businesses. So if you’re unsure, always speak with an accountant who specialises in VAT (like Crunch!). Here are a few examples of where VAT cannot be reclaimed:

Private cars

VAT cannot usually be reclaimed if the car is used privately, even partially. This applies to employees’ personal vehicles used occasionally for business. If a company leases a car, it can usually reclaim 50% of the VAT on lease payments, even where there is private use. This is limited to 85% of the 50% if the vehicle exceeds 50g of Co2 per Km.

Company cars:

You can reclaim VAT on company cars only if they’re used exclusively for business purposes. If there is any private use, the VAT is generally non-reclaimable. 

Client or customer entertainment

HMRC is strict when it comes to entertainment provided to clients or customers. VAT on meals, drinks, tickets, or hospitality for clients is generally not reclaimable. 

Examples include:

• Lunch or dinner meetings with clients.
• Drinks or meals provided during networking events.
• Tickets to concerts, sporting events, or shows for clients.

Why isn’t this claimable?

HMRC does not consider client entertainment to be “wholly and exclusively for business purposes,” even if it is intended to support the business. There are no exceptions for client entertainment. So do not attempt to reclaim VAT here, as this is a common reason HMRC flags claims.

Other common non-reclaimable expenses

Clothing

Ordinary clothing cannot have VAT reclaimed. Only uniforms, protective clothing, or branded clothing used for marketing may be eligible.

Subscriptions unrelated to business

Magazines, clubs, or online services used personally cannot be claimed.

Capital items for private use

High-value items like cars, furniture, or devices used partly for home or leisure purposes must be apportioned correctly.
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Claiming VAT and submitting VAT returns

Accurate record-keeping is the backbone of reclaiming VAT efficiently. HMRC requires that every VAT claim be supported by proper documentation, so keeping organised records is essential.

Keeping records for VAT claims

Under Making Tax Digital (MTD), most VAT-registered businesses must keep digital records and submit VAT returns using compatible software. Keeping digital copies of invoices and receipts in a structured system not only makes claiming VAT easier but also ensures compliance with HMRC rules.

Make sure you keep:

• VAT invoices from suppliers for all purchases.
• Receipts for smaller expenses that may not come with full invoices.
• Records of business vs personal use for mixed-purpose items.

Records must be retained for at least six years in case of an HMRC audit. A consistent digital system reduces the risk of errors and makes audits or reviews much smoother.

Submitting VAT returns

Once your Limited Company is VAT registered, you must submit VAT returns (usually every three months). This process includes:

1. Gathering information by collecting all your invoices and receipts for the period.

2. Calculating VAT for both input and output tax. 

3. Completing the VAT return either through compatible software or in the relevant sections of HMRC’s online portal.

4. Paying and reclaiming VAT owed. If you collected more than you paid, you pay the difference. If you paid more than you collected, you can reclaim the difference or offset it against future VAT bills.

Using accounting software like Crunch can simplify this process. Crunch’s accounting software is fully compatible with HMRC’s Making Tax Digital for VAT. You can use Crunch to keep digital records of sales and expenses, calculate VAT, and submit your VAT returns directly to HMRC, reducing manual admin and the risk of errors.

Using the Flat Rate Scheme

The Flat Rate Scheme allows small businesses to pay a fixed percentage of turnover as VAT.

Under this scheme:

• You generally cannot reclaim VAT on most purchases.
• An exception applies to capital asset purchases over £2,000 (including VAT), where VAT can usually still be reclaimed.
• On both the Standard and Flat rate schemes, you can reclaim the VAT from services up to 6 months prior to registration and goods (if still active in the business) up to 4 years prior to registration on the first VAT return.

This scheme reduces paperwork but may not suit businesses with high VATable costs.

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Timing and partial exemptions

VAT should normally be claimed in the VAT return covering the period in which the invoice date falls. Claims can be corrected later, but must generally be made within four years.

If your company makes both VATable and exempt supplies, only the portion of VAT related to taxable activities can be reclaimed. 

These rules can feel complex, so consulting a qualified accountant can help ensure full compliance with HMRC requirements. 

Common mistakes to avoid

Even small VAT errors can become expensive if they are repeated or picked up during an HMRC review. Most issues are not deliberate; they usually come down to misunderstanding the rules or poor record keeping. Here are some of the most common mistakes limited companies make when reclaiming VAT.

Missing or invalid invoices

HMRC requires a valid VAT invoice to support your claim. Bank statements or card receipts on their own are not always enough. If your invoice does not show the supplier’s VAT number and the VAT amount charged, your claim could be disallowed.

Incorrect categorisation of expenses

Misclassifying costs can distort your VAT return and create inconsistencies in your accounts. For example, recording zero-rated or exempt supplies incorrectly can affect how much VAT you reclaim. Small errors can compound over time and trigger questions from HMRC.

Reclaiming VAT too late

VAT generally must be claimed within four years of the due date of the return in which it should have been included. Leaving claims too long can mean losing the right to recover that VAT altogether.

Missing deadlines for returns or payments

VAT returns are usually due one month and seven days after the end of the VAT period. Late submissions or payments can result in surcharges, penalty points, or interest charges under HMRC’s penalty regime. If you want to see more information about submission deadlines for VAT returns, please check out our Key dates in the 2026/27 tax year guide.

Staying organised, keeping digital records in line with Making Tax Digital requirements, and reviewing your figures carefully before submission will significantly reduce the risk of problems. If you are ever unsure whether something qualifies, it is always safer to check before submitting your return rather than correcting mistakes later.
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Reclaiming VAT with confidence

VAT doesn’t need to be a grey area for your Limited Company. Once you understand the boundaries between business and personal use, keep proper documentation, and understand HMRC requirements, reclaiming VAT becomes more of a structured process rather than a guessing game.

If you are asking yourself, “What can I claim VAT back on as a limited company?”, the real answer lies in clarity and evidence. Is the expense genuinely for business? Has VAT actually been charged? Do you have the correct invoice? If those boxes are ticked, you are usually on solid ground.

Approaching VAT methodically protects your cash flow, reduces the risk of penalties, and ensures you are not leaving money unclaimed. With the right systems in place, VAT becomes part of your routine financial management rather than a last-minute stress each quarter.