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Claiming VAT on Purchases Made Before Registration

 By

SteveAllen

Sadly Steve Allen died in July 2011. His wife Leah would like to thank all those who know Steve and helped contribute to his success. She has recommends Steve's clients and anyone who is interested in this article topic to contact Rob McCann from “The Vat people” on (tel) 0161 477 6600 . Please make reference to Steve Allen.


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Issued October 2010

You can generally reclaim VAT on goods bought up to 4 years before your Effective Date of Registration (‘EDR’), and services bought up to 6 months before your EDR. Remember, you may be able to backdate your VAT registration by up to 4 years, making up to 8 years in total, although once your EDR has been agreed with HMRC, it cannot normally be changed.

VAT on goods You can reclaim VAT on goods bought or imported up to 4 years before the EDR if the following conditions are met:

• the goods were bought by the legal entity now VAT registered

• the goods are for taxable business purposes

• the goods are still on hand at the EDR or were used to make other goods still on hand at the EDR

• appropriate documentary evidence is held (i.e. a tax invoice, C79, or acceptable alternative proof), and a record kept of what has been claimed

You can't reclaim VAT on goods:

• consumed before the EDR (e.g. petrol, electricity, and gas)

• supplied before the EDR, or used to make other goods supplied before the EDR • relating to exempt supplies

VAT on services

You can reclaim VAT on services bought up to 6 months before the EDR if the following conditions are met:

• the services were bought by the legal entity now VAT registered • the services are for taxable business purposes, which means they must relate to taxable goods or services you supply

• appropriate documentary evidence is held (i.e. a tax invoice or acceptable alternative proof) and a record kept of what has been claimed You cannot reclaim VAT on services: • relating to goods disposed of before your EDR – e.g. repairs to a machine you sold before you were registered

• relating to goods or services you supply that are exempt from VAT

Pre-incorporation expenses In addition to above rules, the following conditions must also be satisfied:

• the goods or services must have been obtained for the benefit of the company or in connection with incorporating it

• the person who received the goods or services must have become a member, officer or employee of the company, and must not have been a taxable person at the time of supply

• the company must have reimbursed the person who received the goods or services, or given an undertaking to do so; and • the goods or services must have been obtained for the purposes of a business to be carried on by the company


About the Author

STEVE ALLEN is the Managing Director of VAT Advisers Ltd, and has more than 19 years’ experience in VAT. Beginning with HM Customs & Excise in 1990, Steve spent 8 years in the Department in a variety of roles such as VAT Insolvency and VAT investigation in Liverpool, and latterly as a VAT Inspector at Wigan VAT Office.

Steve left the Department in 1998 to become a consultant with Latham Crossley and Davies, before joining Ernst & Young. In 2001, Steve formed VAT Solutions (UK) Ltd with a co-Director, and built up a successful practice over 8 years before setting up VAT Advisers Ltd in September 2009.

Steve advises accountants and individual businesses on all aspects of VAT, but in particular, issues concerned with land and property, charities, cross-border trading, and arrears of VAT.

VAT Advisers Ltd,
1 Dundonald Avenue
Stockton Heath
Warrington
WA4 6JT
(t) 01925 212244
(f) 01925 212255
(m) 07810 433927
www.vat-advisers.com



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Article Published/Sorted/Amended on Scopulus 2010-11-10 13:42:13 in Tax Articles

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