Pre-registration expenses for VAT

Pre-registration expenses for VAT

Didn't find your answer?

Client VAT registration date is 1 Jan 2015. I can see he will be able to claim back his prereg exps - thanks Les Howard.

He has a leased car that he wishes to put into the business. I would normally claim 50% of the VAT on this. As all his business use of the car since October has been to set up his business, can I claim this back as preregistration VAT?

Replies (11)

Please login or register to join the discussion.

avatar
By Darren Loring
18th Nov 2014 12:32

Afraid Not

Afraid you can only claim for items which still exist at the Registration Date - why could he not have an earlier date of registration?

The Lease costs are for each individual month and therefore although the car still exists at the registration date the lease costs before that date have 'expired'/

Also, fuel and other motor expenses have been used up by the registration date(expect for accessories I suppose such as seat covers, car-phone, etc and I suppose some repairs such as tyres).

For other assets and expenses re items which still exist in the company at registration date you can go back up to 3 year pre registration, assuming the client has the invoices.

Thanks (0)
Replying to Montrose:
avatar
By Patricia McCartney
14th May 2015 09:23

3 years to 4 years

<For other assets and expenses re items which still exist in the company at registration date you can go back up to 3 year pre registration, assuming the client has the invoices.>

You can now go back to 4 years pre registration, but please would someone remind me of the date that this change took place.

Many thanks

Thanks (0)
avatar
By Wanderer
18th Nov 2014 14:06

? Isn't this services though ?
Reclaiming VAT on services you bought before registration

You can reclaim VAT on services you bought during the six months before you registered for VAT if the services were:
• bought by you as the same business ('person') who is now registered for VAT
• for your VATable business purposes, eg they do not relate to any exempt items that you sell
• not related to goods which you disposed of before you were registered for VAT - for example, repairs to a machine you sold before you were registered

Thanks (0)
Portia profile image
By Portia Nina Levin
18th Nov 2014 14:12

I agree with Darren

A lease is a supply of services, but those services have been consumed prior to registration, meaning that the input VAT thereon was not incurred for the purposes of making taxable supplies (which can only be made after registration). Your second bullet point is failed.

Not sure why Darren is digging up all the numpty questions though.

Thanks (0)
avatar
By Wanderer
18th Nov 2014 15:34

Really?

What about:-
Background

Only a person who is already registered for VAT can exercise the right to deduct input tax. However, there are certain circumstances before registration and after deregistration when relief from VAT is permitted. When this happens regulation 111 allows a business to treat VAT incurred when it was not registered for VAT as if it were input tax.

Pre-registration

Where a business buys goods or services before it registers for VAT to support taxable business activities it can recover the tax provided that:
•in the case of goods (either stock for resale or fixed assets), the goods 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 capping limits that are set out in regulation 111.
•in the case of services the supply was made not more than six months before the date 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.

Thanks (0)
Portia profile image
By Portia Nina Levin
18th Nov 2014 15:49

"To support taxable business activities"

The taxable business activities arise after registration, services consumed before registration do nothing to support them.

Thanks (0)
Portia profile image
By Portia Nina Levin
18th Nov 2014 16:11

Scrub that!

I had understood this to be HMRC's argument/position in these circumstances.

But it seems that argument has failed at tribunal: http://www.bailii.org/uk/cases/UKVAT/2004/V18767.html

I now agree with Wanderer.

Thanks (0)
avatar
By Wanderer
18th Nov 2014 16:27

Yep, tribunal agreed with my thoughts. I think only way it could be otherwise is if it was phrased that services relate to goods on hand at date of registration or services related to services to be supplied after registration.

Think the paragraph containing the word 'deemed' that I have quoted is quite pertinent.

Regarding 'second bullet point failed' my interpretation has always been that the second bullet point relates to exempt supplies, not supplies that would be VATable if the trader had been registered.

 

.

Thanks (1)
avatar
By DMGbus
19th Nov 2014 08:18

Services before registration CAN support after regn activities

Where a business were to be a manufacturing or wholesaling trade then rent paid on the warehouse pre-registration would be directly attributable (at least in part) to post registration activities as goods were stored rent-paid pre-regn and sold post-regn.  

So The Wanderer was quite correct [as was Tolleys guidance some years ago] (even if experience tells us that some HMRC officers don't like the concept of VAT being recovered on rent paid pre-regn).   The guidance does not go into detail to distinguish in any more detail on this point but just talks about services being consumed in making pre-regn supplies being (quite fairly) not eligible for recovery - a fair example might be a specific specialist bought-in service recharged to a customer and the sale made pre-regn - very clearly unfair to recover such VAT after being registered as undeniably wholly consumed pre-regn.

Thanks (0)
avatar
By Bruce Thomson
22nd Apr 2015 11:22

Pre-registration expenses

  

  What if the goods have been purchased in the individual's name rather than the name of the company for which registration is now applied for? In al other respects  and in my case they would qualify.

Thanks (0)
avatar
By Kateryna Zakharova
29th Mar 2016 20:42

VAT reclaim

Is it still possible for the company to reclaim vat on services if the date of the invoice is greater than 6 months however it was paid six months before vat registration date?

 

Many thanks

Thanks (0)