VAT reclaim prior to registration

VAT reclaim prior to registration

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Yes, all was going very smoothly until the client mentioned that he was voluntarily registering for VAT and had been in touch with the 'Helpline' over what could be reclaimed prior to his effective registration date.

The advice given by them was apparently extremely liberal and tantamount to all goods for the previous three years, and services in the last six months.

My view was that the claim would be restricted to fixed assets in use at registration, stocks and work-in-progress. Have the rules, or at least the interpretation of them changed recently?

As you can imagine, I was made to feel that I would cost the client a lot of VAT rather than save him money, so he will be looking after his own VAT affairs thank you very much.
Graham Kemp

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By theaardvark
28th Jan 2005 13:17

3 years and 6 months
Input VAT can be claimed on goods (capital assets, stock and consumables) bought up to 3 years before registration PROVIDED they are still on hand at the date of registration.

Input VAT can be claimed on services bought up to 6 months before registration PROVIDED those services have not been "bought and sold" before the date of registration.

In a recent tribunal case a sole prop reclaimed VAT on rents up to 6 months prior to registration. HM C&E disallowed the input VAT saying it didn't relate to trading carried on after registration. The taxpayer argued that a) the rules didn't require it to relate to trading after registration and b) it did relate to trading after registration as she could not have traded after registration without having built the business up by trading before registration. The Tribunal agreed with the taxpayer.

This decision would appear to greatly widen the scope of what VAT is claimable on services received in the 6 months prior to registration.

Regards

Paul Taylor
VATease - VAT Advice

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