You may be able to recover VAT on costs. This will depend on the types of supplies you make.
A VAT registered business can recover VAT on its costs if it makes taxable supplies or supplies that are outside the scope of VAT that give rise to VAT recovery. However, VAT cannot be recovered in relation to any VAT exempt or non-business activities.
If a business only makes taxable supplies, that is, standard, reduced or zero rated supplies, then it should normally be able to recover VAT in full. If a business only makes exempt supplies it would normally not benefit from any VAT recovery. If a business makes both taxable and exempt supplies, it will recover a proportion of the VAT it incurs by applying a partial exemption method. Partial Exemption is a complex area of VAT legislation and it is likely there may be several options available to businesses in this position. The Evelyn Partners VAT team has extensive experience in agreeing Partial Exemption Special Methods (PESM) with HMRC and we are happy to assist your business in improving your VAT recovery position.
VAT on some costs is always irrecoverable, for example VAT incurred on business entertainment.
A valid VAT invoice must be held to support any VAT recovery.