VAT reclaim and HMRC

Why VAT Reclaims Get Rejected

PropertyVAT Team · Updated 21 October 2026 · 3 min read

Reclaim rejections fall into two categories, and the distinction matters enormously. Most are administrative and fixable. One is permanent.

The permanent one: registration

You were not VAT registered at the time of the purchase.

Recovery normally depends on the buying entity being registered when the supply took place. Register afterwards and the VAT on the purchase is generally not recoverable — however commercial the transaction, and however quickly you noticed.

There are limited provisions for pre-registration input tax, but they are restrictive and do not reliably cover a property purchase.

On a £1m opted purchase, that is £200,000 permanently lost, from a failure to complete an administrative step that takes weeks and costs nothing.

If you take one thing from this page: register the buying entity before completion.

The fixable ones

No valid VAT invoice

The most common rejection by a distance.

HMRC requires a proper VAT invoice from the seller — showing their VAT number, the date, a description of the supply and the VAT charged. A completion statement is not a VAT invoice. Nor is a solicitor's letter.

The fix: obtain the invoice. Chase it on completion day, because sellers' solicitors disengage quickly and an invoice that takes a phone call in week one takes months in week six.

VAT charged when it was not due

The seller treats a sale as standard-rated when it should have been exempt, or charges VAT across a mixed-use property including the residential element.

VAT not properly chargeable is generally not recoverable just because it was invoiced. Your remedy is usually against the seller — a credit note and a refund — not against HMRC.

The fix: establish the correct position, then go back to the seller.

Exempt or partly exempt use

Recovery depends on the VAT relating to taxable business use. If the property will be used for exempt purposes, recovery may be restricted or blocked entirely.

The fix: there often is not one, but there may be a structuring answer — an option to tax, or a different holding entity. This is why intended use should be settled before purchase, not after.

The option to tax does not support the position

You claimed on the basis of an option that was notified late, notified over the wrong land, or never notified at all.

The fix: depends how late. Take advice quickly rather than filing and hoping.

Inconsistency across the paperwork

The return, the contract, the registration and the option do not line up — different entity names, dates that do not reconcile, an effective registration date after completion.

The fix: usually straightforward correspondence, but it costs weeks.

How to make a claim robust

Five of those seven happen before you file. Reclaims are won in the preparation, not in the correspondence.

If your claim has been rejected

1. Read the reason carefully. "Insufficient evidence" and "not entitled to recover" are completely different problems.
2. If it is an invoice problem, get the invoice. Most of these resolve.
3. If it is a registration problem, take advice immediately — this is the one worth paying a specialist to look at.
4. If VAT was charged in error, approach the seller.
5. Tell your lender if you have bridged the VAT. A facility whose exit has disappeared needs a conversation, early.

That last point matters. The exit on a VAT bridge is the reclaim. If the reclaim fails, the loan still has to be repaid — which is a further reason the registration step deserves more attention than it usually gets.

This guide is general information, not tax advice. If a reclaim is challenged or refused, take advice from your accountant or a VAT specialist.