VAT - voluntary registration

VAT - voluntary registration

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A new start-up (a company) will earn no income for at least a year (but will be fully VATable when it does).

In the meantime it spends significant sums out of its starting capital on setting itself up - website development particularly - which sums include significant input VAT.

I am aware of when it will be required to register for VAT.  I am also aware of the six month / four year rule about recovery of input tax incurred pre-registration.

I am also aware of voluntary registration.

When is the earliest date this business can register voluntarily and recover the input tax it is incurring?

Replies (4)

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By shaun king
03rd Jun 2015 14:38

When it can provide evidence

I would say it is when you can provide satisfactory evidence that it is the intention of the company to make taxable supplies.

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By User deleted
03rd Jun 2015 18:52

VATA 1994, Para 9, Sch I:

Where a person who is not liable to be registered under this Act and is not already so registered satisfies the Commissioners that he— (a) makes taxable supplies; or (b) is carrying on a business and intends to make such supplies in the course or furtherance of that business, they shall, if he so requests, register him with effect from the day on which the request is made or from such earlier date as may be agreed between them and him.

Now, practically speaking satisfying HMRC means either providing with a copy of the sales invoice already issued or providing a copy of a sales contract signed.

 

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By shaun king
03rd Jun 2015 22:10

Sales invoice

@Tax Guru - a sales invoice would move you from an intending trader to a voluntary registration as Basil points out. I have registered pharma companies as intending traders on the basis it is their intention to make taxable supplies but that may never happen.

As Basil says if you can demonstrate an intention which maybe business plans, purchase invoices etc HMRC will register the client with a proviso that any input tax reclaims are provisional and dependent on certain stated conditions.

Indeed I have had clients who have been registered many years and have never made a taxable supply.

 

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By spidersong
04th Jun 2015 10:40

with apologies to Joni Mitchell....

....I've looked at intending traders from both sides now.

And from this side I've only had to register a couple but not had much problem. From the other in my younger days I registered at least dozens maybe hundreds where trading was at least six months to a year off.

I've also done the reviews of those registered as intending, we had one where we paid out on a bar refurbishment for about 5 years before it opended, and another that had got up to 10 years registered and still intending.

Mortgages, leases, advertising, grant applications (but only where the grant will support future taxable trading obviously), patent applications, equipment purchase invoices, agreements with financiers etc. etc. all of these are regularly used as evidence. I would advise not relying purely on a business plan as these don't tend to be given too much weight by HMRC as they prefer to rely on evidence that includes a third party, and preferably evidence that shows a level of financial commitment (also most people reviewing the applications probabaly can't be bothered to read a full business case).

So in summary I'm with Shaun and Basil, there are some hoops but a sales contract or invoice are smaller hoops than the hoops HMRC normally set.

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