Parking the Ltd for a year - VAT

[Crossroads]

Hi Folks,

This can't be an uncommon scenario in these days of most of financial services being zero-hour PAYE gigs... after wrapping up my last proper B2B contract I've taken an inside role; money is good, project should be interesting and it's likely to last for around a year.

Ltd has a wedge of cash in it and generates more than enough to cover it's small overheads and it is possible that I'll have some ad hoc days here and there working with old clients over the next 12 months so I don't really want to close down. I also have a potential case for investing in a small amount of hardware (circa £2k) that would help in developing a new service that I could launch when this inside gig ends.

My question is what should I do about VAT - if I'm not generating any income should I a) de-register and suck up the VAT I can no longer reclaim on office costs and the potential hardware investment or b) should I continue to submit VAT returns and reclaim, so will actually be getting HMRC to pay me a small amount every quarter?

I believe the legislation is that if there was a genuine business intention then I should continue to submit VAT returns and claim my input tax, and if the plans do not come to fruition, then deregistration in future should be fine and any input tax previously reclaimed does not need to be repaid.

https://www.gov.uk/hmrc-internal-man...t-tax/vit22000

What have others experiences been?

[hobnob]

I've kept my limited company running while I'm on an inside contract, so I reclaimed VAT once a quarter, and HMRC have never complained. There might be an issue if you tried to reclaim more VAT than you'd originally paid (e.g. a 3 month contract followed by 3 years of inactivity), so it's worth keeping track of that.

[northernladuk]

If you intend to use it as you suggest then keep it open. It's still trading albeit at a much lower rate than before so keep as you were. What are you thinking the benefits of de-registering are?

[Crossroads]

It's wasn't the potential benefit of de-registering and any benefit really the paperwork is trivial; it was more:

- whilst I intend to trade again in future it's possible I might not, and I think the correct guidance is that you should deregister as soon as you anticipate no further sales. In my situation I intend to trade so that shouldn't be a problem if I were to then de-register further down the line.

- my main query was around claiming VAT back on anything I purchase for the company in the meantime; company phone, broadband, web hosting and so on however hobnob has shared his experience and perhaps it's not the red flag I thought it might be.

- I believe it's possible HMRC could ask me to pay back any reclaimed VAT for this period if I do not trade again; I can live with that, it will only be small amounts and if I don't trade again it's because I'll have retired. That's not my plan but after this current gig I plan to only do work that is less stressful/part-time/genuinely interesting. I've said that before though!

[northernladuk]

- my main query was around claiming VAT back on anything I purchase for the company in the meantime; company phone, broadband, web hosting and so on however hobnob has shared his experience and perhaps it's not the red flag I thought it might be.

You sure you should be claiming broadband? That was frowned upon in the old but guess there is more argument for the company to pay it if you are permanently WFH. Was too borderline for me so I never did and certainly wouldn't if the company wasn't trading for a year. Personal use will be far in excess to claim for me. Worth asking an accountant about that one again.

- I believe it's possible HMRC could ask me to pay back any reclaimed VAT for this period if I do not trade again; I can live with that, it will only be small amounts and if I don't trade again it's because I'll have retired. That's not my plan but after this current gig I plan to only do work that is less stressful/part-time/genuinely interesting. I've said that before though!

You don't want HMRC taking an interest, particularly the VAT man. I believe the general advice here would be keep doing what you are doing to not attract attention rather than having them get involved in anything.

Do you have an accountant now. Worth asking them?

[Crossroads]

Do you have an accountant now. Worth asking them?

Yes. Will see what they say. I'm favouring the fly under the radar approach, but then again I don't like turning down free money!

[jamesbrown]

You sure you should be claiming broadband? That was frowned upon in the old but guess there is more argument for the company to pay it if you are permanently WFH.

There is really no argument as it has a dual purpose... unless you have a dedicated business line/contract that is separate from your personal connection and has no such dual purpose, but unlikely. Obviously, the company can pay for whatever it likes, but favourable tax treatment as a business expense is a completely separate issue.

[coronasan]

When I took on an inside IR35 role, I deregistered my VAT. When I then got an outside role about a year later, I had trouble getting a new VAT number as my old one was still "active" on the HMRC site. Took a few phones call to get resolved, which is never fun when dealing with HMRC.

[gregNoWorries]

If your genuine intention is to never trade again, then deregister for VAT right away. If not, then you have the option to voluntarily deregister, or just keep filing returns. We have had had several clients remain VAT registered for over a year while then take inside IR35 roles (with the intention to eventually find an outside IR35 role). When some of them then closed their company (after getting small VAT refunds each quarter) there was no issue with the VAT deregistration.