Do you want to know if it is possible to claim VAT back even if you are not VAT registered? If YES, here is everything you must know on how to claim VAT back. VAT registered businesses are allowed by law to charge VAT on their sales, and they equally may be able to reclaim the VAT charged on their purchases and other expenses.

If you are not registered for VAT, you are not able to reclaim VAT on goods or services. You will need to keep all invoices you receive as evidence to support your claim. To be valid, these VAT invoices must have been issued by someone who is VAT registered.

Is It Possible to Claim Vat Back Even If You are Not Vat Registered?

The rule says that if you are not VAT registered then you will not be able to reclaim any VAT unless you are a visitor from overseas. If you have registered VAT for your business as a trader, then you will normally set off the VAT you have been charged by your suppliers against the VAT you have charged your customers. It’s a two way thing.

If you are not registered for VAT, you are not liable to reclaim VAT on goods or services. But if you are registered for VAT, the general rule is that VAT can be reclaimed on goods and services bought by the business, known as input tax, as long as the business makes standard, reduced or zero-rates supplies.

VAT cannot be reclaimed on goods and services that:

  • are for non-business use
  • relate to exempt supplies
  • are for client entertaining
  • are for the purchase of a car (with a few exceptions).

Can You Reclaim VAT on Purchases Made Before Registration?

The general rule is that VAT may be reclaimed on goods bought up to four years before registration and services up to six months before registration.

The goods must be bought by the business that is now VAT registered, be used for taxable (not exempt) business purposes, still be held by the business, or used to make other goods that are still held by the business. Examples include office equipment and goods bought for resale.

In order to qualify for this, services must be bought by the business that is now VAT registered and be used for taxable (not exempt) business purposes. Examples include legal and accountancy services.

Output VAT and What It Entails for your Business

The VAT you charge to your customers is called output VAT. When your business is registered for VAT, you need to add VAT to each VATable item on each of your sales invoices. VATable items are any goods or services that are subject to VAT at the standard, reduced or zero rate.

The rate of VAT you apply to each item is the rate that HMRC stipulates that you need to charge for that item. For example, if a business sells baby equipment and sells a carrycot and a baby grow, the carrycot would be charged at 5% and the baby grow at 0%, because the chargeable VAT for each of these items is different.

HMRC refers to all sales invoices that contain VAT as “VAT invoices”. There are rules for what must be shown on a VAT invoice, so make sure yours are compliant – if you get a visit from a VAT inspector, that’s one of the things they will check.

Now you know how to charge output VAT to your customers, what about the VAT you can see on the bills that your suppliers give you? If your business is registered for VAT, you may be able to claim back the VAT from HMRC as input VAT.

Instances Where You Can’t Reclaim VAT Even If You are VAT Registered

There are some types of costs on which reclaiming VAT is not allowed. A classic example is business entertaining. If you take non-employees (for example, current or prospective customers) out for a meal, the restaurant will charge you VAT – but HMRC says you can’t claim that VAT back as input VAT. You simply have to take the full cost.

If a supplier doesn’t give you a valid VAT invoice, then in most cases you can’t claim the VAT back. There are some exceptions (for example, if you only get a till receipt with the supplier’s VAT number on it, you can claim back VAT for VATable items), but don’t try to claim back VAT on any invoices or receipts that you think may not be valid. If you get a visit from a tax inspector they’ll check the bills your suppliers have given you, so if you’re in any doubt be sure to check with an accountant before claiming.

If a bill has no VAT on it (for example if your supplier isn’t registered for VAT and therefore didn’t charge you VAT) or if the bill relates to VAT-exempt goods or services, you won’t be able to claim any VAT back. The VAT Flat Rate Scheme also works differently. You don’t reclaim input VAT except on large capital assets.

Note that if your business isn’t registered for VAT, then you don’t have to charge VAT to your customers – but this also means that you can’t claim any VAT back.

Remember that if your business’s current and prospective customers are the general public, it’s worth considering staying below the VAT registration limit because if you charge VAT to a customer who isn’t registered for VAT, they can’t claim it back.