Business owners often ask us as their Friendly and expert accountants. Can we claim the VAT before even registration? The answer is yes as explained below:
ERAA Consulting Limited are Friendly and expert accountants.
Recovery of VAT paid before registration
You can recover the VAT paid before VAT registration. For that you must hold acceptable evidence (see See here).
Furthermore, you must be able to meet the conditions as set out below.
Conditions for recovering VAT incurred on goods before you registered
The conditions are:
- the goods were supplied not more than 4 years before the business was registered or was required to be registered
- the goods were supplied to the person who is now registered for VAT
- the goods were obtained for the business which is now covered by the VAT registration and related to its taxable activities – if the services related partly to taxable activities and partly to other activities, you must work out what proportion of the use of the services related to the taxable activities
- you still hold the goods or they have been used to make other goods which you still hold
- you compile a stock account of the goods – this must show the quantities of goods and the dates when you obtained them, and if you used any goods to make other goods, or disposed of them after you were registered for VAT, the account must give details, with dates
Remember, you cannot claim VAT incurred on goods which have been completely used up before registration.
You do not need to reduce the VAT you deduct on fixed assets (for example a van or machinery) to account for any use of the asset before you’re registered, provided the asset is still in use in the business when you register.
But, you must reduce the VAT you deduct on stock for resale to account for any stock that is sold before you’re registered.
If the person who is now registered is a corporate body, you may still be able to reclaim VAT from before it was incorporated.
You must keep a record of all taxable supplies that you receive for your business. This includes any zero-rated supplies you have received.
You must keep this record in such a way that the details of each transaction and the amount of VAT are entered in full or can be easily found by referring to the:
Imported goods and goods removed from warehouse
You or your agent should make sure that official evidence is obtained, where required, of VAT chargeable on imported goods and goods removed from warehouse. See Imports (VAT Notice 702).
This evidence serves the same purpose as a VAT invoice from a registered UK supplier. Without it you may not be able to reclaim tax you have been charged.
The evidence should be annexed or cross-referenced to the relevant invoice from your supplier and both should be retained. For goods acquired from a VAT-registered person in an EU member state, you should hold the relevant invoice from the person supplying the goods.
Services received from abroad
If you receive from abroad a supply of any services which are supplied in the UK, you should hold the relevant invoice from the person supplying the services.
This post does not cover all the situations.
If you need any help and support for VAT returns preparation, book keeping, accounting and tax returns, please contact your Friendly and expert accountants here.