VAT reclaim and HMRC

How to Reclaim VAT on a Commercial Property Purchase

PropertyVAT Team · Updated 20 October 2026 · 3 min read

Reclaiming the VAT is usually straightforward. What catches people out is that most of the work has to happen before completion, not after.

The sequence

1. Register for VAT — before you exchange, ideally.
2. Opt to tax, if your position requires it, and notify HMRC.
3. Complete, paying the VAT to the seller.
4. Obtain a valid VAT invoice from the seller.
5. File the VAT return for the period in which you completed.
6. Respond to any HMRC verification promptly.
7. Receive the repayment.

Steps one and two are the ones that cannot be done retrospectively. Everything after completion is process; everything before it is a deadline.

Step 1: Registration, before completion

You cannot normally recover VAT on a purchase if the buying entity was not VAT registered at the time of the supply.

For most buyers this means registering a newly formed SPV. Registration is not instant, and HMRC may ask questions about the intended business. Start it as soon as the deal is agreed, not when completion is in sight.

Step 2: Option to tax, where it is needed

If you intend to charge VAT on rent, or your transaction depends on TOGC treatment, you will need your own option to tax — the seller's does not transfer to you.

The decision and the notification are separate steps, and notification generally must follow within 30 days of the decision. HMRC acknowledgement takes time and options are not normally backdated, so this belongs early in the timetable.

Step 3 and 4: Complete, and get a proper invoice

Pay the VAT at completion and obtain a valid VAT invoice from the seller. Not the completion statement alone — an invoice showing the seller's VAT number, the date, a description of the supply, and the VAT charged.

Chase this on the day. Sellers' solicitors disengage quickly after completion, and an invoice you cannot obtain in week one can take months in week six.

Step 5: The return

You reclaim through the VAT return for the period in which you completed. The purchase goes in as input tax.

Because a property purchase is large relative to normal trading, the return will usually be a repayment return — you are claiming money back rather than paying it over. That is normal, and it is also what attracts attention.

Timing matters enormously here. Completing shortly before your quarter end means filing within weeks. Completing shortly after means waiting almost a full quarter before you can even submit. Same claim, potentially three months' difference.

Step 6: HMRC verification

Expect it on a large or first-time claim. It is usually a document request rather than an investigation:

• The seller's VAT invoice
• The completion statement
• Your option to tax and HMRC's acknowledgement
• Evidence of the intended use of the property
• Sometimes, details of how the purchase was funded

Have this pack assembled before you file. Claims stall more often on a slow response from the taxpayer than on HMRC's own queue.

What tends to go wrong

The first of these is the expensive one. The others cost time; that one can cost the VAT.

Funding the gap

Even a perfectly executed reclaim leaves a gap between paying the VAT and getting it back — typically one to three months. A VAT bridge funds that gap and is repaid from the refund, so your completion date does not depend on HMRC's timetable.

This guide is general information, not tax advice. VAT recovery depends on your specific circumstances — confirm your position with your accountant or VAT adviser.