If a business only makes supplies which are outside the scope of UK VAT can it still register for VAT voluntarily (if turnover is below the VAT threshold) and recover VAT on its costs?
I'm not sure if supplies outside the scope of VAT are the same as Exempt supplies?
Replies (6)
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Non-taxable supplies
If a business only makes supplies which are outside the scope of VAT, it cannot register for VAT. There are exceptions for certain supplies made outside the EU, but that would still be taxable or exempt supplie sif made in the UK.
But I do wonder what supplies it makes?
If the supplies are outside the scope, then you can register for VAT. Any input tax is therefore reclaimable.
Paras 10(1) to 10(4) of Sch 1 VATA 1994 is your reference.
To clarify, outside the scope is not the same as exempt. If your client is making only exempt supplies, it is unable to register for VAT.
Yes
I've seen it done and done it myself (when I was the other side of the fence).
And there are plenty of applications that got queried along the lines of 'you've said you're doing £80K of taxable supplies but your only activity seems to be exempt why is that?'
EDIT: Sorry this should have quoted the query on whether registration were refused if only making exempt supplies - but that seems to have not been picked up.
To clarify...
it's what Les said, rather than the more blanket assurance from Cheekychappy, although his reply does point to the correct parts of law it misses the important caveats Les gave.
So if it's a UK charity making outside the scope supplies (non-business) in the UK then it cannot register and cannot recover Input Tax. If it's making supplies outside the scope because they are in the course of business but take place in another country and would be taxable (or certain exempt ones) in the UK then it can.
See this section of the VAT Registration Manual: http://www.hmrc.gov.uk/manuals/vatregmanual/vatreg23100.htm