Back date VAT claim on expenses after leaving FRS?

Client left flat rate scheme, purchased assets in previous months (under £2k)

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Hi All

I have a client which has traded under the flat rate scheme for many years. Due to turnover exceeding the threshold, last month they left the FRS and now account for VAT using the standard method. However, the client purchased several bits of plant and machinery less than 6 months ago, each cost less than £2k. They were unable to re-claim the VAT at the time, due to min £2k on capital expense rule in FRS. The assets are still owned and used by the business. Is there any scope to reclaim the VAT on these now? Almost like when a business newly VAT registers and can back date the VAT.

Many thanks, Andrew

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Trevor Steel
By Trevor Steel
07th Dec 2023 22:50

They cannot recover this VAT now - because they've already indirectly "recovered" it by being on the flat rate scheme. Under the scheme they will have accounted for VAT on their income at less than the 20% standard rate, and this reduction is to take into consideration VAT incurred on their expenditure. A reason why VAT is separately recoverable on capital items over £2,000 could be that it's difficult to build the impact of infrequent / higher-value purchases into a lower percentage.

This differs to pre-registration expenses, where the goods are still held by the business, and there has been no previous "indirect" recovery of any of the VAT.

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