Pre-registration input tax & partial exemption

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We occasionally come across this issue, where a charity needs to be registered for VAT, and has incurred input tax from before he was registered.

There is very little guidance on the subject, but there are two Tax Tribunal cases from 1994 which address the issue. T Douros (T/A Olympic Financial Services) (VTD 12454) & GN Byrd (T/A GN Byrd & Co) (VTD 12675). The Tribunal in Byrd followed that in Douros and followed the same logic.

UK legislation appears not to provide for this specific situation, so the Tribunal referred back to the European VAT Directive. Interestingly in an earlier case, the Tribunal commented that the law is both obscure and confusing (D W Wyck (VTD 6619), which we have difficulty disagreeing with!

The conclusion is that input tax is allowed only where it is directly attributable to taxable supplies. But there is no provision for the recovery of residual input tax, not any application of any de minimis rules in relation to pre-registration input tax.

The comment was validly made in one decision that the pre-registration rule (Regulation 111) is placed alongside the partial exemption rules (Regs 99-111), so why did the draftsman not put a simple cross reference in?

About Les Howard


Hi, I am a VAT Consultant, working mainly with charities. I am based in Cambridgeshire

I have over 20 years experience in VAT, and am currently also a part-time member of the Tax Tribunals.


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