How do I reclaim VAT on business purchases?
Answered 11 March 2026
Here is a comprehensive answer on how to reclaim VAT on business purchases.
What the law says
Definition of input tax "Input tax", in relation to a taxable person, means VAT on the supply to them of any goods or services, or VAT paid or payable on the importation of goods, being goods or services used or to be used for the purpose of any business carried on or to be carried on by them.
What can be reclaimed Under VATA 1994 s.26, the amount of input tax for which a taxable person is entitled to credit is so much of the input tax for the period as is attributable to:
- (a) taxable supplies (standard-rated, reduced-rated, or zero-rated);
- (b) supplies outside the UK that would be taxable if made in the UK; or
- (c) such other supplies outside the UK and exempt supplies as the Treasury may specify by order.
Mixed business/non-business use Where goods or services are used partly for business and partly for other purposes, the VAT must be apportioned so that only the portion referable to business purposes counts as input tax.
Evidence requirement VAT on purchases is treated as input tax only if the charge is evidenced and quantified by reference to such documents as may be specified in regulations.
HMRC guidance / practice
The basic mechanism You reclaim your input tax by deducting it from your output tax when you complete your VAT Return. If your input tax is greater than your output tax, you reclaim the difference from HMRC.
How much you can reclaim
- If you can reclaim input tax in full, the amount is the VAT shown on the VAT invoice from your supplier.
- As a registered person, you can reclaim VAT on purchases and imports as relates to the standard-rated, reduced-rated and zero-rated supplies you make. In principle, you cannot reclaim VAT which is for any non-business activity or relates to exempt supplies.
Evidence you must hold You must keep all invoices for standard-rated, reduced-rated and zero-rated supplies received for your business. You cannot use a pro-forma invoice or one marked "this is not a tax invoice" as evidence. Only a VAT-registered person can issue a VAT invoice — if you receive an invoice from an unregistered person and knowingly use it to reclaim VAT, you are committing an offence.
Key restrictions to be aware of:
| Situation | Result |
|---|---|
| Exempt business (only exempt supplies) | Cannot register for VAT; cannot recover any input VAT |
| Non-business activities | VAT on goods/services used for non-business purposes is not input tax and cannot be reclaimed |
| Zero-rated supplies | You can reclaim VAT on purchases relating to those sales |
Summary of steps
- Be VAT-registered — only taxable persons can reclaim input tax.
- Obtain a valid VAT invoice from your supplier and retain it.
- Check the purchase relates to taxable supplies you make (standard, reduced, or zero-rated) — not to exempt or non-business activities.
- Deduct the input tax from your output tax on your VAT Return; if input tax exceeds output tax, HMRC will repay the difference.
- Apportion if purchases are used for mixed business/non-business or taxable/exempt purposes.
For further detail on completing your VAT Return, HMRC directs you to VAT Notice 700/12. For partial exemption apportionment rules, see VAT Notice 706.
Citation sources
Part I The charge to tax Payment of VAT by taxable persons Input tax and output tax. 24 1 Subject to the following provisions of this section, “ input tax ”, in relation to a taxable person, means the following tax, that is to say— a VAT on the supply to him of any goods or services; b ... ; and c VAT paid or payable by him on the importation of any goods ..., being (in each case) goods or services used or to be used for the purpose of any business carried on or to be carried on by him. 2 Subjec
If you make taxable supplies (standard-rated, reduced-rated or zero-rated), you have to account to HMRC for the VAT due. This is your output tax. You’ll normally charge the VAT to your customers. If your customers are registered for VAT and the supplies are for use in their business, the VAT is their input tax. In the same way, VAT charged to you on your business purchases is your input tax. As a registered person, you can reclaim from HMRC as much of the VAT on your purchases and imports, as re
Part I The charge to tax Payment of VAT by taxable persons Input tax allowable under section 25. 26 1 The amount of input tax for which a taxable person is entitled to credit at the end of any period shall be so much of the input tax for the period (that is input tax on supplies ... and importations in the period) as is allowable by or under regulations as being attributable to supplies within subsection (2) below. 2 The supplies within this subsection are the following supplies made or to be ma
d on or to be carried on by a taxable person is not, in any circumstances, to be regarded as used or to be used for the purposes of the business if, and to the extent that, it is used or to be used for that person's private use or the private use of that person's staff. 5B In subsection (5A) “ relevant asset ” means— a any interest in land, b any building or part of a building, c any civil engineering work or part of such a work, d any goods incorporated or to be incorporated in a building or ci
If then you can reclaim input tax in full the amount to reclaim will be the amount of VAT shown on the VAT invoice from your supplier the invoice is a less detailed VAT invoice (read paragraph 16.6.1) which does not show the VAT charged separately your input tax will be the VAT fraction of the total amount charged for any standard-rated supply (read paragraph 7.3.1) This must be the VAT fraction for the rate of VAT in force at the time of supply (tax point). Read section 14 and section 15
You must keep all invoices for standard-rated, reduced-rated and zero-rated supplies that you receive for your business. They must be kept in such a way that, given the invoice date and the supplier’s name, they can be easily presented to HMRC on request. You cannot use an invoice which is marked ‘pro-forma’ or ‘this is not a tax invoice’ as evidence for reclaiming input tax (read paragraph 17.3). Only a VAT-registered person can issue a VAT invoice. There are financial penalties for the unautho
If you only sell or otherwise supply goods or services that are exempt from VAT then yours is an exempt business and: you cannot register for VAT you cannot recover any VAT you incur on your purchases or expenses This is in contrast to where you sell or otherwise supply zero-rated goods or services. Here you can reclaim the VAT on any purchases that relate to those sales. If you sell mainly or only zero-rated items, you can apply for an exemption from VAT registration. If you are exempt from reg
If you have any non-business activities, you will not be able to reclaim all the VAT you’re charged on your purchases. This is because the VAT charged on goods and services used for non-business purposes is not input tax and cannot be reclaimed.