Pre registration VAT "input" tax

Pre registration VAT "input" tax

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Hi

I know that "input" tax can be claimed for goods/services for the six months prior to registration.

Does this mean that if I have the appropriate paperwork that "input" tax on advertising and phone bills can be reclaimed?

My client also had on hand at registration a lorry originally costing £90,000 - what is the cut off date for this.

My thanks to anyone who answers as I have had advice from the HMRC helpline which seems in conflict

with their own publications 

Replies (3)

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chips_at_mattersey
By Les Howard
03rd Jun 2014 09:56

Pre-registration input tax

The lorry is 'goods,' and subject to the four year cut-off.

Anything that is not goods is services. So, advertising and telephone bills are subject to the 6 month cut-off.

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By MBK
03rd Jun 2014 13:20

Where a lot of people get this wrong ...

... is in construction - for example builders work converting / refurbing property before a business starts up.

The work of a construction contractor is a service, and any materials / goods he supplies will all be part of the service. So 6 month cut off applies.

By contrast, if the business buys the materials direct and simply pays the contractor to fit / install them then the VAT on the directly purchased goods is subject to the 4 year cut off.

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Head of woman
By Rebecca Cave
10th Jun 2015 10:45

What did the VAT helpline advise?

It seems that HMRC changed their internal guidance on reclaiming pre-registration VAT back in 2011 but has not yet changed the advice in the public VAT notice 700/1 and VAT Notice 700.

Neil Warren's article in today's Taxation magazine explains that the VAT on the lorry ( in your case) should be apportioned to the years it is expected to be used. Then VAT on the portion of its life that falls before the VAT registration date should not be reclaimed. Say the lorry cost  £90,000 including VAT of 15,000, and was purchased on 1 April 2012, and had an expected life of 10 years. The trader registered for VAT with effect from 1 April 2015, after three years of the lorry life was used. So 7/10 of the VAT can be relaimed for the lorry: 7/10 x 15,000 = £10,500 rather than £15,000.

Teh HMRC position may be correct, but as they have not made this clear in thier public notices I don't think its fair.

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