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Claiming for VAT paid when you’re not VAT-registered

The question was put to us, “Is there any way we can claim back input VAT paid in a period when we weren’t VAT-registered?”

The answer may come as a refreshing surprise.

A business can generally reclaim VAT incurred on goods it has purchased in the period up to four years before the date of registration.  This can include equipment (e.g. furniture and computers), as well as stocks and consumable supplies.

A business may also generally reclaim VAT incurred on services it has purchased during the six months before VAT registration.  This may, of course, include professional advice in the early stages of the business.

Unsurprisingly, in the complex field of VAT compliance and planning, there are a few provisos or traps to be negotiated:-

  • The goods or services must have been bought by the entity that is claiming back the VAT.  This means, for example, if you incorporate a business you have previously been carrying on as an individual, and the company later registers for VAT,  it cannot claim back VAT incurred before the date of incorporation (even if it was incurred inside the four-year or six-month time limits).
  • Goods or services must have been bought for taxable business purposes, and in the case of goods they must remain “on hand” at the date of registration.
  •  You must still have the relevant receipt or invoice, evidencing the input VAT.
  •  Fairly obviously (but we’ll include it for avoidance of doubt), VAT cannot be claimed on goods and services which relate to exempt supplies or non-business activities.

At the other end of business life, once a VAT registration has been cancelled there are still limited circumstances in which input tax can be claimed.  This includes VAT paid on goods and services supplied to the business while it was registered.  It can also be claimed on services (such as legal or accountancy advice) which relate solely to the activities of the business while it was VAT registered.  However, VAT cannot be claimed on goods actually purchased after deregistration.

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