The Pre-registration VAT claiming process can be a daunting task for small businesses in the UK. In order to shed some light on the situation, Taj Accountants has come up with this blog to guide you through the process of reclaiming all the VAT you’re eligible for. 

What does Pre-Registration Mean?

It means, where a business buys goods or services before it registers for VAT, to support taxable business activities when it is registered. You can claim pre-registration input tax on the first VAT return, but there are different conditions to meet for goods and services, stated below: 

   * Goods 

The VAT paid on either stock or fixed assets purchased in the four-year period before registration can be claimed. But  those assets must remain on hand at the date of registration and will be used in the newly registered business. These goods must have been bought within the time limits that are set out in HMRC regulation 111; for businesses with a registration date after 1 April 2010 the time limit will be 4 years.

   * Services

VAT on services can only be claimed if the service was purchased within six months of registration. Six months represents a period in which it is deemed that services obtained will relate to business activity carried on at the time of registration.

Note: Tax incurred on goods on hand at registration cannot be deducted if the VAT was incurred outside of the time limits set out in regulation 111 by HMRC.  This includes VAT incurred on services performed on those goods.

What does the HMRC’s guidance say about claiming Pre-Registration VAT? 

Most business owners assume that they should be able to reclaim 100% VAT on purchases made, even before having their businesses registered for VAT. To clarify their misunderstanding, in 2011, HMRC issued an update to their VAT guidance which stated that the claimable amount of VAT must be based on the use of purchases made for the business solely.

Until 2015, the pre-registration VAT clauses were not well known to the general public. HMRC issued Revenue and Customs Brief (RCB) 16/2016 regarding the deduction of VAT filed on goods and services bought by a business before it registers for VAT but used afterwards.

Have your reliable Accountants in London by your side to guide you through the daunting process.

How to treat input tax: General Practitioners (GPs) and pre-registration VAT

GPs can only treat VAT incurred on goods purchased for dispensing that are:

   1. on hand at the date of registration; and

   2. to be used to make zero rated supplies

   3. as if it were input tax. The tax should be reclaimed on the first return.

HMRC does not usually allow tax incurred on services to be treated as if it were input tax. However, if a GP can show that the services were used in the making of the zero rated supply of goods, and the services were received not more than six months before the date of registration, the tax may be recovered on the first return as if it were input tax.

Final Thoughts

As a business owner, you need to keep in mind that VAT registration, non-business or exempt use of purchases might affect the amount of VAT that can be recovered for the pre VAT registration period. Have your reliable Accountants in London carry the burden for you and guide you through the process.

How Taj Accountants Can Help You?

As your reliable Small Accountants in East London, Taj Accountants offers you a wide range of accounting and taxation advice to sole traders, limited companies or partnerships. Our team of expert accountants help our small business clients solve issues, create value, maximize growth and improve business performance. Whether you are looking for manageable account support, or advice regarding the best possible VAT scheme, can always rely on Taj Accountants.

DISCLAIMER: The purpose of the blog is to provide information and insight regarding the situation. The readers must contact experts before making any decisions based on the information. We highly appreciate you to contact Taj Accountants for further assistance.