Last updated: 14 October 2026
Can you reclaim VAT on a capital asset costing over £2,000?
Yes. A VAT-registered business can usually reclaim the VAT on equipment, machinery, vans and other capital assets in the VAT return for the period in which it receives the VAT invoice, whatever the cost. There is no £2,000 limit for VAT. The rules that matter are business use, a valid VAT invoice and, for very large purchases, the Capital Goods Scheme.
Where the “£2,000” idea comes from
Many businesses set an internal capitalisation limit, for example treating items over £2,000 as fixed assets in their accounts. That is an accounting policy, not a VAT rule. For VAT, a £500 laptop and a £20,000 machine are treated in the same way.
Conditions for reclaiming
- You are VAT-registered when you buy the asset, or it qualifies as a pre-registration purchase
- You hold a valid VAT invoice addressed to your business
- The asset is used for taxable business purposes
- If you use it partly for private or exempt activities, reclaim only the business-use share
Exceptions
Cars
You usually cannot reclaim VAT on buying a car, unless it is used only for business and isn’t available for private use, for example a pool car or a taxi or driving-school car.
Flat rate scheme
Businesses on the flat rate scheme can reclaim VAT only on a single capital purchase of goods costing £2,000 or more, including VAT. This is probably where the £2,000 figure comes from. Below £2,000, the VAT is covered by your flat rate percentage.
Capital Goods Scheme
For computer equipment of £50,000 or more (excluding VAT), and land and buildings of £250,000 or more, you may need to adjust the VAT you reclaim over 5 or 10 years if your taxable use changes.
Example
A VAT-registered printing company buys a press for £24,000 plus £4,800 VAT. It reclaims £4,800 on its next VAT return. For corporation tax, the £24,000 cost can be claimed through the Annual Investment Allowance or full expensing.
Partial exemption
If you also make exempt supplies, for example insurance or financial services, you may only reclaim part of the VAT under partial exemption rules.
Timing your VAT claim
Reclaim the VAT in the return for the period that covers the invoice date, even if you pay later, unless you use cash accounting. Under cash accounting, you reclaim it when you pay. For large purchases, time the order so that the invoice falls in a period you are about to file. That improves cash flow because the refund arrives sooner. Keep the invoice and a note of how the asset is used, in case HMRC asks.
Frequently asked questions
Can I reclaim VAT on an asset bought before I registered?
Yes, if you still own it and bought it within 4 years. See VAT on pre-registration purchases.
What if I sell the asset later?
You charge VAT on the sale if you reclaimed VAT when you bought it.
Can I reclaim VAT on a leased asset?
Yes, on the lease rentals. For cars with private use, you can reclaim 50%.
Does a van count as a car?
No. Vans qualify for full VAT recovery if used for business.
Related: how to calculate VAT and how to register for VAT.
Talk to Accotax
Want this handled for you? Our team at Accotax can help with reclaiming VAT on business assets. See our VAT accountants service, or contact us for a free, no-obligation quote.
This page is general guidance based on HMRC rules for the 2026/27 tax year, checked against gov.uk on 14 October 2026. It is not personal advice, so speak to an accountant about your own situation.
