Understanding Pre-VAT Registration Expenses and How to Reclaim Them

If your company is in the process of registering for VAT, or you are thinking of registering voluntarily, you must understand how to reclaim VAT on expenses made before your VAT registration date. These pre-VAT registration fees can result in significant revenue recovery if they meet specific HMRC conditions.

What Expenses Can You Reclaim?

You can reclaim VAT on goods and services purchased before VAT registration, as long as they were for business reasons. However, the rules vary slightly for products and services.

1. Goods:

• You can claim VAT on items purchased up to four years before your registration date, as long as they are still in stock or were used to make other goods that are still available when you register.

• Raw materials, office supplies, and goods that are still unsold at the time of registration are a few examples.

2. Services:

• Reimbursement of VAT for services rendered within the six months before registration may be possible.

• These services should be directly relevant to your company and continue to be so after registration.  Accounting and legal fees are common examples.

What Cannot Be Claimed?

Not all expenses are eligible for pre-registration VAT recovery. VAT cannot be reclaimed if;

• The products are no longer owned or used by your company at the time of registration.

• The services are for commodities or products that have already been sold or consumed before registration.

For example, services such as repairs and maintenance related to equipment sold before VAT registration are ineligible.

Reclaiming Pre-Registration VAT:

Once you’ve registered for VAT, you’ll need to submit your claim for pre-registration expenses with your first VAT return. You must provide the invoices and any supporting evidence to justify these charges. When filling out the VAT return, include pre-registration VAT claims in the usual input tax claims section (Box 4). Keep thorough records for initial VAT returns as HMRC may conduct a closer inspection.

Tips for Reclaiming Successfully:

• Keep detailed records: Make sure you have all of the legitimate and proper VAT invoices.

• Use accounting software: To streamline the VAT reclaim process, many businesses find it helpful to manage pre-registration expenses independently using accounting software.

• Consult professionals: Given the complexities involved, speaking with an accountant will help guarantee that you maximise your claim while remaining compliant with HMRC guidelines.

By following these important rules, you can reclaim pre-registration VAT on qualified expenses and improve your company’s financial situation from the outset of your VAT registration journey.

Need help reclaiming VAT?

We’ve helped hundreds of UK businesses reclaim VAT on pre-registration expenses. Avoid costly mistakes and speak to a specialist today, it’s free and no obligation