Most business owners apply to be VAT registered sometime after they start trading. They wait until the business is successful enough to make VAT registration worthwhile, or delay
registration until their sales reach the compulsory VAT threshold (£83,000).

In either case, the business can reclaim VAT on goods purchased in the four years before the date the VAT registration became effective, if the goods are still held on that date. ‘Goods’ for these purposes includes fixed assets. VAT on services paid for prior to registration can only be reclaimed if the invoice for the services is dated up to six months before the VAT registration date.

If you registered for VAT in the last four years, it is worth checking your old receipts to see if you can reclaim VAT on earlier purchases. Over the last five years HMRC has been challenging claims for VAT on pre-registration purchases, particularly for expensive assets such as vans. They said the claim had to be reduced to reflect the wear on the van between the date of purchase and the VAT registration date. This is not what the law says, and HMRC has now admitted that they were wrong.

If you have reclaimed only a proportion of the VAT incurred on the purchase of assets acquired before your business became VAT registered, you can now amend that claim. Where HMRC sent you a demand for VAT overclaimed you can get that VAT back.

Call us on 01942 682550 to see how we can help.