Share this content

Retrospective VAT registration in company accounts

How is retrospective VAT registration (the VAT) shown in later company year-end accounts?

Didn't find your answer?

Hi, I recently voluntary registered my ltd company for VAT, and currently in the process of retrospectively reclaiming input VAT on purchases I made, however, haven't made any sales yet. 

At the moment I'm completing my year-end accounts (YE Jan 2021), so looking for some advice on how retrospective vat/registration is treated in company accounts. 

As I do not expect HMRC to contact until after my accounts deadline, curious to know if I will have to submit ammended accounts to Companies House for this last year, and also for each year, I am retrospectively reclaiming VAT for?

Having already paid the input VAT, has never been individually detailed in my company accounts. 
 

Replies (30)

Please login or register to join the discussion.

RLI
By lionofludesch
25th Oct 2021 16:14

You've left the accounts a bit late, fella.

Due by next Sunday and only now are you asking for help ? It's a recipe for disaster.

It depends. What are these purchases you're claiming for and do you still have them?

Thanks (1)
Replying to lionofludesch:
avatar
By David Ex
25th Oct 2021 16:23

lionofludesch wrote:

You've left the accounts a bit late, fella.

Due by next Sunday and only now are you asking for help ? It's a recipe for disaster.

Five days earlier than his 2017 accounts, to be fair.

Your response then still, I believe, holds good. You said “Find an accountant. You're out of your depth.”.

Thanks (1)
Replying to David Ex:
RLI
By lionofludesch
25th Oct 2021 16:37

David Ex wrote:

lionofludesch wrote:

You've left the accounts a bit late, fella.

Due by next Sunday and only now are you asking for help ? It's a recipe for disaster.

Five days earlier than his 2017 accounts, to be fair.

Your response then still, I believe, holds good. You said “Find an accountant. You're out of your depth.”.

In fairness, he doesn't seem to have drowned yet.

Thanks (0)
Replying to lionofludesch:
avatar
By CW15
25th Oct 2021 17:28

thanks for your response lionofludesch. Yes the purchases have all been added up and sent to HMRC, a mix of goods & services.

The accounts have generally been done, it’s just the retrospective VAT element I’m unsure of. Correspondence (HMRC) has mostly been about an amount I hope to reclaim.

I’m guessing I probably will have to revisit my accounts once submitting them as I’m awaiting official word.

Thanks (0)
Replying to CW15:
RLI
By lionofludesch
25th Oct 2021 17:38

CW15 wrote:

thanks for your response lionofludesch. Yes the purchases have all been added up and sent to HMRC, a mix of goods & services.

Just humour me by answering the question. What are these purchases and do you still have them ?

Thanks (0)
Replying to lionofludesch:
avatar
By CW15
25th Oct 2021 18:15

Yes I still have those goods purchased (stationery etc), the services, of course used as is a retrospective VAT claim & registration.

Thanks (0)
Replying to CW15:
RLI
By lionofludesch
25th Oct 2021 18:19

CW15 wrote:

Yes I still have those goods purchased (stationery etc), the services, of course used as is a retrospective VAT claim & registration.

OK - so you've got a few letterheads. Not sure what the services are or when you bought them as you're being quite secretive about those, but it doesn't sound like a lot of money to me.

What are your thoughts, as a director, on the company's materiality threshold?

Thanks (0)
Replying to lionofludesch:
avatar
By CW15
25th Oct 2021 18:45

Sorry I don’t fully understand the question, I try to list everything, unless items are exempt.

I’m looking to reclaim around £500 of input VAT, the services like; web hosting, phone bills etc.

Thanks (0)
Replying to CW15:
RLI
By lionofludesch
25th Oct 2021 20:08

Oh. I was hoping that, as you've decided to take on the accounts for the company, you'd made an effort to research how to do it. Maybe look at FRS105 occasionally.

Let me explain it like this. If Shell find out that their accounts understated profit by a tenner, you wouldn't expect them to resubmit their accounts. The numbers are smaller for your compsny but the principle's the same. Imho, £500 isn't big enough to warrant resubmission.

The bigger problem is whether all that £500 is recoverable. I would expect a lot of questions to be asked before you get your money. I infer that you haven't actually started trading yet. If that's so, that's another issue that will delay your repayment.

Thanks (1)
Replying to lionofludesch:
avatar
By CW15
26th Oct 2021 13:16

Thank you for the pointers. The accounts have been relatively simple thus far, I actually started the process of VAT registration back in Spring, so have had already lots to answer. I appreciate the advice.

Thanks (0)
Replying to CW15:
RLI
By lionofludesch
26th Oct 2021 13:26

CW15 wrote:

Thank you for the pointers. The accounts have been relatively simple thus far...

We hear that a lot.

And then we find out that the OP had problems that he just wasn't aware of.

Thanks (0)
Avatar
By I'msorryIhaven'taclue
25th Oct 2021 16:26

Does HMRC accept that you've commenced "trading" (in spite of your having made zero sales)? Have they been so informed by you, either for Corporation tax or VAT registration purposes?

Thanks (0)
Replying to I'msorryIhaven'taclue:
avatar
By CW15
25th Oct 2021 18:00

As I understand it; by HMRC definition, I’m not considered to be trading, I expect I might be soon.

So haven’t been informed, perhaps when I start to pay CT & first VAT return resolved, then maybe I’ll be considered as trading.

Thanks (0)
Replying to CW15:
RLI
By lionofludesch
25th Oct 2021 18:15

CW15 wrote:

As I understand it; by HMRC definition, I’m not considered to be trading, I expect I might be soon.

So haven’t been informed, perhaps when I start to pay CT & first VAT return resolved, then maybe I’ll be considered as trading.

OK - I'm intrigued. How are you going to be liable to pay CT before you start trading?

It's possible, I suppose, but it's an unlikely scenario.

Thanks (1)
avatar
By Leywood
25th Oct 2021 16:33

The 'great unwashed'

WP
& others.

Thanks (1)
Jason Croke
By Jason Croke
25th Oct 2021 17:10

Is this a retrospective VAT registration or just retrospective reclaiming of VAT incurred in the past?

Thanks (0)
Replying to Jason Croke:
avatar
By CW15
25th Oct 2021 18:03

It’s both

Thanks (0)
Replying to CW15:
RLI
By lionofludesch
25th Oct 2021 18:20

CW15 wrote:

It’s both

[chuckle]

Great answer!!

Thanks (0)
avatar
By Wanderer
25th Oct 2021 17:17

Been going for at least 5 years, haven't made any sales and decided it would be a good idea to voluntarily register for VAT?
CW19 has HMRC actually accepted your VAT registration?

Thanks (1)
Replying to Wanderer:
avatar
By CW15
25th Oct 2021 18:52

Yes, they’ve accepted the company VAT registration, though longer than I expected to reclaim input VAT.

Thanks (0)
Replying to CW15:
Jason Croke
By Jason Croke
25th Oct 2021 22:51

HMRC accepted the VAT registration based on what you told them/answers you put on the application. If you are voluntarily registering for VAT retrospectively, HMRC will want to see you are trading or intending to trade. HMRC will ask for this proof after you submit the first return, that is when HMRC will dig deeper.

If you've not got proof of intention to trade, HMRC may reject your reclaim and cancel your registration. Intention to trade is subjective, to a degree. Any advertising costs?, any potential clients or suppliers? Just be ready to deal with these type of queries.
https://www.gov.uk/hmrc-internal-manuals/vat-business-non-business/vbnb2...

Some businesses may go years before they make a sale, like a property developer or a startup developing a new app, so the defence to HMRCs queries will depend entirely upon the nature of the business, etc.

Thanks (1)
Replying to Jason Croke:
avatar
By Hugo Fair
25th Oct 2021 23:38

"Some businesses may go years before they make a sale" ... I've always wondered how long that can be (subject to the depth of investors' pockets) in terms of being believed by the tax authorities.
In the '70s I met a friend's father who seemed to me to have the most glamorous of jobs ... flying to and fro across the globe most weeks and entertaining in lavish style.
His job? Chief salesman for Westinghouse in their nuclear reactor division - with the intention of 'closing a sale sometime in the next decade'!

Thanks (2)
Replying to Hugo Fair:
Jason Croke
By Jason Croke
26th Oct 2021 07:59

Funny, but yes, some sales have as long a lead time as the half life of radioactive isotopes.

It's subjective. I've had clients developing a new build residential site, 2 years just to get planning and clean site, then another year to build...but a genuine business leaves a genuine trail of planning applications or other evidence.

But a near dormant business just putting the mobile phone and internet costs through the return with no real evidence of doing anything may get deregistered by HMRC and potential penalties for attempting to reclaim VAT when not entitled.

For £500 of retrospective input tax, it's not worth drawing attention to yourself, unless there is a genuine business here with proof that one day it will make sales.

Recent tribunal case, Babylon Farm, shows the risks of thinking you have a business, when you don't. Good case summary here
https://www.rossmartin.co.uk/vat/vat-cases/5771-upper-tribunal-confirms-...

Thanks (0)
Replying to Jason Croke:
avatar
By Tax Dragon
26th Oct 2021 09:45

Jason Croke wrote:

For £500 of retrospective input tax, it's not worth drawing attention to yourself, unless there is a genuine business here with proof that one day it will make sales.

And, presumably, sufficient link between the phone costs in 2018 and the sales in 2022?

Thanks (1)
Replying to Tax Dragon:
RLI
By lionofludesch
26th Oct 2021 09:56

Tax Dragon wrote:

And, presumably, sufficient link between the phone costs in 2018 and the sales in 2022?

[chuckle]

Thanks (0)
Replying to Jason Croke:
avatar
By CW15
26th Oct 2021 13:29

There's little doubt I have intention to trade, I guess the delay I'm currently going through, regarding retrospectively reclaiming VAT is part of the process of evidencing that, along with initial registration.

Thanks (0)
Replying to CW15:
RLI
By lionofludesch
26th Oct 2021 13:40

CW15 wrote:

There's little doubt I have intention to trade, I guess the delay I'm currently going through, regarding retrospectively reclaiming VAT is part of the process of evidencing that, along with initial registration.

It's not what you think so much as what HMRC think.

Thanks (1)
Replying to CW15:
avatar
By Tax Dragon
26th Oct 2021 14:27

CW15 wrote:

There's little doubt I have intention to trade, I guess the delay I'm currently going through, regarding retrospectively reclaiming VAT is part of the process of evidencing that, along with initial registration.

Lovely circular argument. I'm applying for a VAT refund, therefore I must be intending to trade, therefore I must be due a VAT refund, therefore I'm applying for a VAT refund. Or... I'm intending to trade, therefore I'm due a VAT refund, therefore I'm applying for a VAT refund, therefore I'm intending to trade. (I could go on, but I think you know how circles work.)

Thanks (2)
Jason Croke
By Jason Croke
26th Oct 2021 15:00

As others have posted, its HMRC you need to convince.

If you registered at the start of NewCo, HMRC still have the right to deregister you at anytime if they believe there is no business, but HMRC would need to cut you some slack for a couple of years before being able to prove their hypothesis, whereas backdating a registration means HMRC don't need a hypothesis, they can see you haven't traded or intended to trade between the retrospective registration date and the date you file your first return.

What is your business activity/sector? Is it retail, mgmt consultant, etc?

Thanks (0)
Replying to Jason Croke:
avatar
By CW15
26th Oct 2021 15:18

Hi Jason, thanks for the info, it's a marketing business.

Thanks (0)
Share this content