I have some clients who are developing a website from which to trade. It's taking years to develop, mainly because the clients have other jobs and can't devote much time to the new venture. Costs are escalating and they want to know if they can voluntarily register for VAT even though there is no sales income yet. If they can, can they backdate the registration and therefore reclaim the vat they have suffered on payments to the software developers and various consultants used etc.? There is a definite intention to trade in the future, but until the website is fully functioning and up & running, there won't be any sales income generated.
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I had this a while ago, and HMRC said they could not regisiter until they were going to make supplies.
Once they registered we claimed back the VAT incurred in accordance with the rules.
But there are restrcitions:-
assets used in the business and goods for resale held at the date of registration which were bought within four years previously, and on which VAT was incurred; and
services received for the purpose of the ongoing business within six months prior to the date of registration.
Registered before making supplies
VAT registration can be obtained on the following basis:
" You are not currently making taxable supplies but intend to in the future. "
If that's what HMRC told Arthur then HMR were wrong.
VAT Act 1994, Schedule 1, Para 9:
"Where a person who is not liable to be registered...satisified the Commissioners that he -...(b) is carrying on a business and intends to make [taxable] supplies in the course or futherance 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"
They just need the intention to make supplies they don't need to have a definite date, they just need a definite intention, and they can backdate to the first date that they can clearly demonstrate that intention. Now proving that may be difficult, but the first payment of the development costs if the website is clearly going to make taxable supplies may do it, or looking for investors, securing business loans etc.
The law on this hasn't changed since I manged a registration team in my HMCE days, I've seen traders registered for upwards of 6/7 years or longer before they got round to making supplies. To be fair the one I remember going on longest was a nightclub where the fitting out took ages since they kept running out of money, or running into planning issues. The procedure used to be that you'd register an intending trader and then put it in the diary for 12 months later, ring them to see if they we're still going to trade (if no Output Tax had arrived on a return), if they weren't then; 'rinse and repeat'.