Recovering VAT on pre-registration costs

Businesses that register for VAT often overlook a valuable opportunity. Specifically, they may reclaim VAT paid before registration. As a result, they recover costs on certain goods and services bought earlier. However, strict conditions and time limits always apply.

Time limits for goods and services

Firstly, different rules apply to goods and services. For goods, you can generally reclaim the VAT in two situations. Either the business still holds the goods. Alternatively, it has used them to make other goods it still holds. Moreover, you must have bought the goods within 4 years before registration.

By contrast, services follow a shorter window. Usually, you can reclaim VAT on services bought within 6 months before registration. In both cases, though, the costs must relate to the newly registered business. Furthermore, they must link to its taxable activities. Clearly, recovering VAT on pre-registration costs rewards careful checking.

How to make your claim

Importantly, you should include pre-registration VAT on your first VAT return. Therefore, you must hold valid VAT invoices and supporting records. In addition, these records should show how you calculated any private use. Consequently, you can support the figures if HMRC asks questions.

Special rules to watch

However, some situations follow special rules. In particular, extra care applies to:

• Partially exempt businesses
• Businesses with non-business income
• Significant capital assets under the Capital Goods Scheme

Therefore, these rules can change the amount you recover. As a result, you should always check your position carefully.

Why careful checking pays off

Finally, careful review helps you avoid missed opportunities. Moreover, it ensures you claim only what the rules allow. So, recovering VAT on pre-registration costs demands both accuracy and good records.

Get expert help today

Are you unsure about recovering VAT on pre-registration costs? Then, contact our team today. We will help you identify and claim every eligible amount correctly.