I have a quick question on which I need a little guidance:
I need to claim VAT on costs which were incurred pre VAT registration and these costs relate to the start up of the business.
I understand that on the very first VAT return, you are able to make an adjustment on the return to claim any additional VAT incurred prior to being VAT registered.
I am also aware that the rule and time period for pre-registration VAT which can be claimed is: 3 years on goods, and 6 months for services.
Please can somebody help with:
- Is there a list from HMRC which states how they split goods & services (as I am aware that they are quite particular)
- How would the VAT on office rental, office equipment, IT equipment, business telephone etc be treated? and can VAT on such items be re-claimed if incurred prior to being VAT registered?
- Also, should the VAT registeration be at todays date or can this be backdated?
Your help will be much appreciated.
Regards
-- Edited by NA_AA on Thursday 15th of December 2011 06:12:01 PM
VAT on office rental can be zero-rated and as with all input tax, you should first refer to the invoices to see if VAT has been charged.
You should not back-date the registration date to the beginning of pre-trading expenditure. This should be either at commencement or when you have exceeded the Registration Threshold, unless you are applying for Voluntary Registration.
There's a few things you should have considered here:-
If you back-date your registration, you will need to charge VAT on all the sales you have made in the past 9 months? eg. Send VAT-Only invoices on top of all the sales invoices you have made since commencement OR Suffer the VAT yourself on the sales total you have made eg. 1/6th
Secondly, are you familiar with the Turnover requirements? eg. £73,000 for compulsory Vat Registration? This threshold rises most years; funnily enough, round about when you started.
Also, to go off the topic a bit, are you familiar with capital allowances and private use?
You can ask to back-date your Voluntary Registration, I think it's 4 years now??? and in the case of Error (who is to say you just plain forgot to claim office rental vat etc?). So yes, you have a case for claiming the items listed.
Have you iintroduced yourself to local accountants? -- you might get a free consultation. It'd be a good idea as you probably have significant VAT at stake here and at the very least, telephone the VAT office for some guidance. You cannot expect tax planning advice from them -- like myself, they would be doing you a disservice to say categorically, you should or shouldn't register at a certain date.
Best wishes on your new venture.
EDIT : bit about local accountants.
-- Edited by Don Tax on Friday 16th of December 2011 09:30:53 AM
My understanding of reclaiming VAT on pre registration costs is the items still need to be getting used at the date of registration.
Therefore if you have a computer that was bought pre registration then you would still need to be using it when you registered to reclaim the VAT.
If it is a service then the service would still need to be used at he time of registration. What you cant do is go back and reclaim VAT on all the services you have used in the 6 months before you registered and VAT on all the assets/goods you bought in the 3 years before you registered if you no longer have them.
The whole purpose of the pre registration rules is to enable people to reclaim VAT on goods/services they have previously paid for provided they still have the goods or are still to use the services.
HMRC - Informed me that I can backdate my VAT registration to the date of incorporation, and can re-claim VAT provided I had proof that this expense was business related if enquired
Local Accountant: Informed me that it would be wise to register for VAT as at todays date rather than backdating the registeration date as this would cause additonal work - e.g. If I decide to backdate the VAT registeration to incorporation date then this would mean backdating the registeration by 18 months, therefore additional work will be required to calculate the VAT
My thoughts are:
- Ideally I would like to register for VAT and coincide this with the financial year of the company. This therefore means that I will have to backdate the registeration by 4 months.
- Once the registeration is complete, I will make an adjustment in my first VAT return for any VAT I would like to re-claim which was incurred pre-registration.
Note that the reason why I would like to register for VAT on a voluntary basis is that I am in a position where almost most times I am in a VAT receivable position from HMRC rather than payable
When was the date of incorporation? Were any of the goods and services on which you are seeking to claim VAT purchased prior to this date?
It's only slowly hit me that yours is the business we are discussing. Are you providing bookkeeping/accountancy services?
If you're selling mainly to Registered businesses, the local accountant might be steering you away from raising VAT-only invoices then chasing these up with customers, who might not particularly thank you for the admin.
Was any of the rent paid in advance for the post-registration period ?
VAT 700 I was surprised to see there are no other references to Vat on Rent so did
a bit of delving and came up with an interesting case
As Mark says, it seems obvious that the rent has been consumed but the commentators are saying Regulation 111 of SI 1995/2518 states that this condition only applies to goods and not services.
WHY BACKDATE? You can ask for your quarterly periods to be staggered at any time to fall in line with the accounting year. As you don't appear to be a retail business, goods on hand aren't the issue but backdating may facilitate claiming more of the services on which vat was incurred.
Tim
Edit : made weblinks clickable.
-- Edited by Don Tax on Saturday 17th of December 2011 11:54:34 AM
Backdate: This is the issue I am not sure about, as I have incurred costs for the past year which have included VAT which I could potentially re-claim, and am looking for the best way to proceed which will allow me to claim the most amount of VAT.
I'd be tempted to correspond with the VAT office to see which items they may oppose, rightly or wrongly. Don't be afrad to quote the Jerzynek case unless you can see that there is a subsequent ruling or case law. I've looked and I can't.
I agree that backdating 4 months may maximise your Inputs claim, subject to Office Rent etc being acceptable.
I had a lengthy conversation with HMRC today and they said the following:
- You can re-claim VAT on pre-registeration costs related to services (best see this as anything intangible) up to 6 months pre-registeration date. e.g. If you backdate VAT registeration to July 2011 then you go back 6 months from July therefore can go back to January 2011 and re-claim any input VAT relating to services
- You can re-claim VAT on pre-registeration costs related to goods (best see this as anything tangible) up to 4 years pre-registeration date provided that the goods were purchased for business use only and you still hold these goods
Note that VAT on rent paid for office is considered as a service by HMRC therefore you are allowed to re-claim any input VAT suffered upto 6 months pre-registeration date.
However, I forgot to ask:
- What about a Laptop I had bought - I did not get a VAT receipts at the time of purchase as at that time there was no intention of registering for VAT - Can I just calculate 20% of the cost? Note that this Laptop was purely for business use only
- VAT paid on parking charges - Can I re-claim VAT paid on car parking charges for the times I visited clients?
- You can re-claim VAT on pre-registeration costs related to goods (best see this as anything tangible) up to 4 years pre-registeration date provided that the goods were purchased for business use only and you still hold these goods
Note that VAT on rent paid for office is considered as a service by HMRC therefore you are allowed to re-claim any input VAT suffered upto 6 months pre-registeration date.
