Last updated: 14 October 2026
How do you record VAT when claiming business expenses?
To reclaim VAT on an expense, you need a valid VAT invoice addressed to your business, or a simplified invoice for purchases of £250 or less including VAT. You then record the net amount as the expense and the VAT separately as input tax in your MTD software. You don’t issue a VAT invoice yourself when you claim an expense. The supplier issues it to you.
What a valid VAT invoice shows
A full VAT invoice must include:
- a unique invoice number
- the supplier’s name, address and VAT registration number
- the invoice date and the tax point, if different
- your business name and address
- a description of the goods or services
- the net amount, the VAT rate and the VAT amount for each rate
- the total VAT payable
For retail purchases of £250 or less including VAT, a simplified invoice is enough. It shows the supplier’s details and VAT number, the date, a description, the VAT rate and the total.
Recording the expense in your books
- Enter the supplier, date and invoice number
2. Code the net amount to the right expense account, for example travel, stationery or software
3. Record the VAT at the correct rate, such as 20% standard, 5% reduced, zero-rated, exempt or no VAT
4. Attach the receipt image, for example with Dext
5. Reconcile the payment against your bank feed
Example
A £120 train ticket has no VAT, because passenger transport is zero-rated. A £60 hotel night includes £10 VAT. A £36 software subscription includes £6 VAT. Record £10 and £6 as input tax, and £0 for the train.
Employee expense claims
When employees claim back business costs, the business can reclaim the VAT if the receipt is a valid VAT invoice and the cost is for your business. Ask employees to keep full receipts, not card slips. Mileage allowances have their own rules. See VAT on mileage allowances.
Expenses with no VAT to reclaim
- Train, bus and air fares, which are zero-rated
- Postage stamps, which are usually exempt
- Insurance and bank charges, which are exempt
- Purchases from suppliers that aren’t VAT-registered
- Business entertainment of clients, which is blocked; see VAT on hospitality and gifts
Recharging expenses to a customer
If you recharge a cost to a client, for example a hotel bill, it is usually a “recharge”. You charge VAT on the full amount at your normal rate. A true “disbursement”, which you pay as the client’s agent, is passed on without VAT, but the conditions are strict.
Using expense apps
Apps such as Dext and Xero Expenses read the VAT from receipts automatically. Check the VAT rate on each item before publishing it.
Frequently asked questions
Can I reclaim VAT from a card slip?
No. A card terminal slip isn’t a VAT invoice.
The invoice is in my name, not my company’s. Can the company reclaim the VAT?
HMRC may accept it if the cost was clearly for the business, but get invoices in the company’s name.
How long do I keep VAT records?
At least 6 years.
What if I lose the invoice?
Ask the supplier for a copy. HMRC can accept alternative evidence in some cases.
Related: how to calculate VAT.
Talk to Accotax
Want this handled for you? Our team at Accotax can help with VAT on expenses. 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.
