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Can I claim for stock in hand changing vat status?

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Hi there, I run an ecomerce business and I've recently switched from sole trader to Ltd, whilst simultaneously switching from flat rate vat scheme to standard.

What I cant seem to find out definitively is can I claim the stock I have on hand which was bought whilst being on the frs but isn't yet sold? My accountant seems to think I can't claim this, but that doesn't seem right to me as I'm effectively paying full rate vat on the purchase and then again on the sale.

I've nearly finished a rough stock take and it's quite a high figure, for me anyway, so it could seriously affect my business and effectively cut all my profits if I can't claim.

Amy help would be greatly appreciated

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chips_at_mattersey
By Les Howard
09th Apr 2021 16:12

The question about stock on hand is answered here: www.gov.uk/government/publications/vat-notice-733-flat-rate-scheme-for-s... see para 12.8.
Assuming you retained the same VAT number when you changed from sole trader to limited I see no problem with claiming the VAT.
(These are questions that you should have asked your Accountant before changing!)

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Replying to leshoward:
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By Biyi
09th Apr 2021 16:43

Thanks for the reply, I haven't fully changed the vat reg yet but it will be the same number as I've got the request for transfer form that I'm just about to send off.
Yes I saw that point from hmrc so that's why my accountants response has thrown me off. The other thing is that I have switched from flat rate to standard before but then my sales dropped so I switched back to flate rate, but this was about 2 years ago, not sure if that affects anything.

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RLI
By lionofludesch
09th Apr 2021 16:14

Yep, you can claim.

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By Paul Crowley
09th Apr 2021 16:16

Sell it from sole trade to company could have been the answer.
But not really considered if TOGC applies which might be the reason your accountant says no.

Always best to ask why he says no
Then you could have asked us a question with a better level of detail

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Replying to Paul Crowley:
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By Biyi
09th Apr 2021 16:38

Thanks for the reply. I got this response from someone on my accountants team after asking the same question here 'It’s on a cash basis so you would only claim vat back on any stock paid for after the date it changes'.
So this was the reason given however I don't really agree, it doesn't make sense to me that you can't claim it

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Replying to Biyi:
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By Paul Crowley
09th Apr 2021 16:53

You may be better off getting an accountant that charges more, but who asks the correct questions and establishes the facts before giving a knee jerk reaction.

Did you speak to the firm's VAT expert?

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Replying to Paul Crowley:
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By Biyi
09th Apr 2021 17:17

Paul Crowley wrote:

You may be better off getting an accountant that charges more, but who asks the correct questions and establishes the facts before giving a knee jerk reaction.

Did you speak to the firm's VAT expert?

You might be right, this is actually the second time I've got misleading advice from them, first time it really affected my business, which is why I'm a bit more vigalent now.

Update though, I talked to hmrc vat helpline, at first they said I can't claim it but when I showed them the section on the hmrc website saying you can and how to do it she apologised for the advice initially given. So she agreed you can in the end but my confidence on hmrc advice is a bit shaken

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Replying to Biyi:
RLI
By lionofludesch
09th Apr 2021 17:32

Biyi wrote:

Paul Crowley wrote:

You may be better off getting an accountant that charges more, but who asks the correct questions and establishes the facts before giving a knee jerk reaction.

Did you speak to the firm's VAT expert?

You might be right, this is actually the second time I've got misleading advice from them, first time it really affected my business, which is why I'm a bit more vigalent now.

Update though, I talked to hmrc vat helpline, at first they said I can't claim it but when I showed them the section on the hmrc website saying you can and how to do it she apologised for the advice initially given. So she agreed you can in the end but my confidence on hmrc advice is a bit shaken

It's what I would've expected.

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Replying to lionofludesch:
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By Paul Crowley
09th Apr 2021 21:52

HMRC lose VERY regularly at tax tribunals

@OP
Do not rely upon HMRC
Do you now have anything in writing to say you can claim?
The get out clause was in Les' reply
Transfer the VAT number, that way the change to company is ignored and TOGC not a problem
The number transfer was not in the original posting

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Replying to Paul Crowley:
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By Biyi
09th Apr 2021 22:10

Thanks for the reply, it was weird speaking to hmrc because they flat out said no at first and then when I read the paragraph from the hmrc website they backtracked.

I haven't got anything specifically addressed to me in writing, but I think what's on their website should be enough, so if it comes down to it I would just use that as the reason I claimed.

This is it -
'12.8 Stock on hand when you leave the scheme
You may be able to make a stock adjustment and claim input tax when you leave the scheme. Follow the steps in the table at paragraph 12.9 to find out if and how, you need to make an adjustment. To do this you will need to value your stock. You do not need to do a formal stock-take for the purpose of valuing your stock, but your figures must be reasonable. It makes sense to keep a record of how you valued your stock in case we query the figures.'

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Replying to Paul Crowley:
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By Paul Crowley
09th Apr 2021 22:16

If planned I would not usually advise keeping the old number
Fix the problem before the change
Any old Vat issues then die
New 'trader' starts with a clean sheet
Transfer then a TOGC

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Replying to Paul Crowley:
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By Biyi
09th Apr 2021 22:24

So you're saying basically sort out all the flat rate stuff and then change the vat number over?

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