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TB Accountants

VAT Return and Reclaim

VAT Return and Reclaim

Whether you are a UK-based or overseas business conducting business in the UK, VAT registration and payment may be required.

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Understanding input tax deductions and VAT refunds is crucial for effective financial management.

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Learn more: VAT Registration and Filing

VAT Input Tax Deductions

According to UK tax law, you may reclaim some VAT payments (Input Tax) on eligible business expenses to reduce the overall amount of VAT payable (Output Tax).

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To qualify for reclaim, the expense must be directly related to your business, and the supplier must issue a valid VAT purchase invoice that clearly shows the VAT amount.

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Examples include:

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  • Business Purchases: Stock, raw materials, production supplies, office supplies

    Equipment and Fixed Assets: Office equipment, machinery, furniture, fixtures

  • Professional Services: Accounting, legal and consultancy fees, advertising, marketing, IT services, software subscriptions

  • Transport and Travel: Company vehicles and maintenance, fuel and transport costs (business use only), business travel (excluding employee commuting)

  • Rent and Utilities: Commercial rent, internet and telephone charges, business electricity, water, and gas bills

  • Training and Employee Benefits: Business-related training courses, workshops, etc.

 

Business purchases from overseas may incur import VAT during customs clearance.  In these cases, the import VAT paid may also be reclaimable.  

VAT Refunds
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VAT Refunds

If, during your VAT return filing, your input tax exceeds your output tax, submitting your VAT return will automatically request a refund from HMRC.

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The refund request is therefore submitted as part of your VAT return for the same period, and the deadline for this is one month plus seven days after the end of the return period.  

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The return period will typically be quarterly.

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Foreign businesses without a UK establishment but who have paid VAT in the UK (e.g. for exhibitions or goods purchases) may apply for a refund through the VAT Refund Scheme, provided:

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  • The applicant’s country/region has a VAT reciprocity agreement with the UK (e.g. EU countries)

  • The goods or services were not used for UK sales but for overseas business purposes

  • The refund application must be submitted by 30 June of the following year (e.g. the deadline for 2024 claims is 30 June 2025)

VAT Refund Process

To apply for a VAT refund, businesses must:

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(1) Prepare and Submit Refund Documentation

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  1. Complete the VAT Return form

  2. Provide purchase invoices showing the supplier’s VAT registration number and VAT amount (where applicable)

  3. Provide import documentation (e.g. C79 certificates) (where applicable)

  4. Provide business bank account details for receiving the refund (optional)

 

(2) Submit VAT Returns Online (Making Tax Digital – MTD)


HMRC requires all VAT-registered businesses to use the digital tax system (MTD for VAT) to submit returns. The process includes:

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  1. Log into the HMRC VAT Online service, or MTD-compatible software

  2. Complete your VAT Return with the correct input/output tax amounts

  3. HMRC will process and confirm the VAT return status upon submission

 

(3) Refund Review and Processing

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  1. HMRC usually processes VAT refunds within 10 working days

  2. Additional documentation may be requested if HMRC needs to review your reclaim amount

  3. Once approved, the refund will be paid directly into the business’s bank account, or by cheque if no bank details are provided

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VAT Refund Process
Required Financial Records for VAT

Required Financial Records for VAT

UK businesses must maintain accurate financial records for all VAT-related transactions to ensure correct reporting and compliance.

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Key records include:

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  • Sales Records: Sales invoices, sales journals, credit notes

  • Purchase Records: Purchase invoices, purchase journals, import VAT certificates (e.g., C79 forms)

  • Other Financial Records: Bank statements, VAT returns submitted, VAT payment and refund history

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Digital Record-Keeping (Making Tax Digital – MTD)

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HMRC requires businesses subject to VAT filing obligations to comply with Making Tax Digital regulations. This means all VAT records must be stored electronically and submitted using MTD-compatible software.

Record Retention Period

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According to HMRC regulations, businesses must keep VAT records for at least 6 years. For transactions involving land, property, or long-term assets, a longer retention period may apply.

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Consequences of Incomplete or Inaccurate Records

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  • VAT Audits: Incomplete or incorrect records may trigger an HMRC audit or compliance check.

  • Penalties and Interest: Errors or omissions can result in extra tax, fines, or interest charges being levied. 

  • Reclaim Request Rejection: Missing valid invoices or supporting documents may lead to input tax reclaims being disallowed.

Record Retention Period

Success Stories

Client B: The expert tax advice from TB Accountants resulted in significant tax savings for our business.

Client A

Client E

Client C: The audit services from TB Accountants ensured our compliance with regulations and improved our financial transparency.

Client B

Client F

Client D: TB Accountants' consulting services provided us with strategic insights that boosted our business performance.

Client C

Client G

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