Claiming VAT can reduce your business costs and recover vital cashflow, but it is not automatic. HMRC requires evidence to support every claim, and outsourcing your bookkeeping does not change the rules.
Your bookkeeper cannot claim VAT simply because a payment appears in your bank account. If the correct invoice or receipt has not been provided, the VAT should not be reclaimed.
When can a business reclaim VAT?
A VAT registered business can usually reclaim VAT where:
- The purchase was made for the purposes of the business.
- The supplier was registered for VAT.
- VAT was correctly charged.
- The business holds a valid VAT invoice or acceptable VAT receipt.
- The expense is not subject to a specific restriction.
If something is used partly for business and partly for private purposes, only the business proportion of the VAT can normally be reclaimed.
What evidence do we need?
In most cases, we need a valid VAT invoice or VAT receipt showing the relevant details. Depending on the value and type of invoice, this will usually include:
- The supplier’s name and address
- The supplier’s VAT registration number
- The invoice date
- A description of what was purchased
- The amount excluding VAT
- The VAT rate and amount charged
- The total amount payable
A card receipt, bank statement or entry on a banking app does not prove that VAT was charged correctly and is not normally enough to support a VAT claim.
Similarly, a quotation, order confirmation, delivery note, supplier statement or pro forma invoice is not a valid VAT invoice.
HMRC states that VAT cannot be reclaimed using an invalid invoice, pro forma invoice, statement or delivery note. You should ask the supplier for a correct VAT invoice where the original document is missing or incorrect. Read HMRC’s record keeping guidance.
What happens if you do not send us the receipt?
If we do not have the supporting VAT receipt or invoice when preparing your VAT return, we will not reclaim the VAT.
This protects both you and us. Claiming VAT without adequate evidence could result in HMRC:
- Disallowing the VAT claim
- Charging interest
- Applying penalties
- Reviewing other VAT periods or business records
If you later provide a valid VAT invoice, it may be possible to consider the VAT claim on a subsequent return, subject to the relevant rules and time limits.
Normally we won’t chase for VAT receipts once a VAT quarter has passed and is filed the onus is on you to find these.
Outsourcing bookkeeping does not transfer responsibility
Appointing a bookkeeper or accountant makes the process easier, but it does not remove the business owner’s responsibilities.
Your bookkeeper can only work with the information and documents you provide. They cannot create missing receipts, assume that a supplier is VAT registered or treat every bank payment as containing VAT.
The legal responsibility for submitting an accurate VAT return remains with the business. This means you must:
- Obtain valid VAT invoices and receipts
- Send the documents to us promptly
- Explain what each purchase relates to where this is not obvious
- Identify any private or non business element
- Tell us about refunds, credit notes and cancelled purchases
- Review and approve the VAT return before submission
VAT cannot be reclaimed on every business expense
Even with a valid VAT invoice, some VAT is restricted or cannot be reclaimed. Common examples include:
- Business entertainment provided to clients or potential clients
- Most cars where private use is permitted
- The private element of expenses with mixed business and personal use
- Purchases relating to exempt business activities
- Items bought under certain second hand margin schemes where VAT is not shown separately
Special rules can also apply to fuel, employee expenses, overseas purchases, imports, property costs and businesses using the Flat Rate Scheme.
Make it part of your routine
The simplest approach is to send documents to us as soon as possible. Take a clear photograph or upload the digital invoice when you make the purchase rather than waiting until the VAT return is due.
Send it to us or to Hubdoc to allow it to be processed.
Please make sure the whole document is visible and readable. A photograph showing only the total or the card payment slip may not contain enough information to support the claim.
The key message
We want to help you claim all the VAT to which your business is properly entitled. However, we must also ensure that every claim follows HMRC’s rules.
If you provide a valid VAT invoice or receipt, we can assess and process the claim. If you do not provide the evidence, we will not claim the VAT.
Good record keeping protects your business, supports accurate VAT returns and helps ensure that you do not miss out on legitimate claims.
