Could you be missing out on pre-registration VAT claims?
You are able to reclaim VAT on goods and services you bought before you were VAT registered. For goods it can be any goods bought up to 4 years before being VAT registered, and for services it can apply for any services bought up to 6 months before you were VAT registered. However, there are some conditions that must be met. Firstly, regarding goods bought, the goods must have been bought by you as the entity that is now registered for VAT. Secondly, the goods must be for your VAT taxable business purpose. And finally, that you still own the goods, or the goods have been used to make goods you currently own.
There are also guidelines around what you cannot reclaim VAT on regarding goods. You cannot reclaim VAT on goods that have been completely used up before you registered for VAT. This is because you do not own the goods anymore, for example, petrol. Additionally, if the goods have already been sold or supplied before being VAT registered you will not be successful with your claim. And finally, if the goods relate to supplies you make that are exempt from VAT.
There are also some conditions that must be met when trying to reclaim VAT on services bought within the 6 month period before you registered for VAT. These are similar to the guidelines following goods bought and are as follows. The services were bought by you as the entity and the services are for your VAT taxable business purposes.
There are also guidelines about when you would not be able to reclaim VAT on services, which are also similar to the guidelines regarding goods that do not qualify. These are, if the services relate to goods you disposed of before you were VAT registered, or, if the services relate to goods or services, you supplied that are exempt from VAT.
Additionally, to be able to claim pre-registration VAT on goods and/or services you have bought, you need to obtain a valid VAT invoice or receipt for each item.
The HMRC guidance reads ‘You reclaim VAT on goods bought before registration by including their value in box 4 of your first VAT return.’
Once you have identified which goods and services are eligible to claim back VAT on, you will need to provide proof of the cost and the date of the purchase. You must also be able to prove that these goods/services are still useful to your business today.
