VAT Return must be submitted to HM Revenue and Customs (HMRC) every 3 months (accounting period) and it includes information such as total sales and purchases, the amount of VAT you owe or can reclaim and what is your VAT refund from HMRC. A VAT Return must be submitted even if there is no VAT to pay or reclaim. Charities pay VAT at a reduced rate on some goods and services.

In order to reclaim the VAT paid on business purchases and expenses the claim must be for a business activity and the business element must be worked out if the expense also had a personal use.

VAT can’t be reclaimed on entertainment expenses or purchases for which the VAT Flat Rate Scheme was used (except some capital assets worth more than £2,000). There are also special rules for reclaiming VAT for buying or repairing cars, fuel costs, staff travel expenses such as accommodation and transport expenses and businesses that are partly exempt from VAT.
If you paid VAT to HMRC, you haven’t received it from a customer and it is a debt you have written off as bad debt, you can reclaim the VAT if: you haven’t sold the debt or charged more than the normal price of the item and if the debt is between 6 months old and 4 years and 6 months old. Bad debts are reclaimed via your VAT Return and it is important to keep records about the debt.