Reply to: pre-VAT reg VAT claim possible - under FRS?

[Jessica@WhiteFieldTax]

So why don't accountants suggest paying a year up front before registering for FRS, so the VAT can be reclaimed?

I wish mine had.

Taxpoint rules would prohibit this I suspect (haven't gone back to look at them in detail though for chapter and verse)

[mudskipper]

So why don't accountants suggest paying a year up front before registering for FRS, so the VAT can be reclaimed?

I wish mine had.

[Jessica@WhiteFieldTax]

I don't think that is true though is it?

A very quick search doesn't turn up anything determinative, but para 7.6 of Notice 733 seems to suggest so by virtue of prescribing a differential treatment for sale of assets purchased (and vat reclaimed) pre registration.

One difficulty we face - flat rate and bank interest was an example - was that the only definitive guidance from HMRC is Notice 733, and if thats silent then things become murky.

[TheCyclingProgrammer]

Having the invoices in the company name does help and I would certainly recommend doing that if possible. However, in most cases the expenses are pre-incorporation expenses aswell as pre-registration expenses and so this is not always possible. Just make sure you can justify the expenses as being wholly and exclusively for business.

Good point. This HMRC manual document goes into a bit more detail and specifically distinguishes between "pre-registration" and "pre-incorporation". The intent must be that the purchase is made by the entity that is VAT registered but obviously the entity doesn't exist pre-incorporation, so I think its just a case of common sense:

VIT32000 - How to treat input tax: pre-registration, pre-incorporation and post-deregistration claims to input tax under regulation 111

Also discussed on this AccountingWeb thread:

VAT on pre incorporation purchases | AccountingWEB

In short: there are various rules and conditions and they are different for goods vs services so anybody who wants to reclaim pre-registration/incorporation VAT should probably do so *after* consulting their accountant first IMO.

[TheCyclingProgrammer]

IIRC

You can't claim the VAT on "Capital Inputs" unless it exceeds £2000.00 and is on one invoice making up that amount, if you are on FRS? So, three invoices

1. £550.00
2. £850.00
3. £950.00

Totalling £2350.00 but can't claim the VAT, due to that anomaly of FRS.

Generally yes, but OP is specifically talking about pre-registration expenses.

[VectraMan]

Having the invoices in the company name does help and I would certainly recommend doing that if possible. However, in most cases the expenses are pre-incorporation expenses aswell as pre-registration expenses and so this is not always possible. Just make sure you can justify the expenses as being wholly and exclusively for business.

I did this. Unless you start your Ltd. without registering for VAT, you're not going to have invoices in the company name because it doesn't exist yet.

FRS won't make any difference because it's before you joined the FRS.

[northernladuk]

IIRC

You can't claim the VAT on "Capital Inouts" unless it exceeds £2000.00 and is on one invoice making up that amount, if you are on FRS? So, three invoices

1. £550.00
2. £850.00
3. £950.00

Totalling £2350.00 but can't claim the VAT, due to that anomaly of FRS.

What about Capital ShakeItAllAbouts?

I don't think that is true though is it?

[Scruff]

IIRC

You can't claim the VAT on "Capital Inputs" unless it exceeds £2000.00 and is on one invoice making up that amount, if you are on FRS? So, three invoices

1. £550.00
2. £850.00
3. £950.00

Totalling £2350.00 but can't claim the VAT, due to that anomaly of FRS.

[Martin at NixonWilliams]

Having the invoices in the company name does help and I would certainly recommend doing that if possible. However, in most cases the expenses are pre-incorporation expenses aswell as pre-registration expenses and so this is not always possible. Just make sure you can justify the expenses as being wholly and exclusively for business.

[northernladuk]

As the HMRC docs say, as long as the purchases were made in the company name, you should be fine to reclaim these as you obviously weren't on the FRS at the point of your initial VAT registration (or prior to it). Obviously you still need valid VAT invoices in YourCo's name to support your claim.

This is probably a point most people fall foul of when setting up LTD's for the first time.

[TheCyclingProgrammer]

Thanks guys, my interpetation too is that it is ok (and it surely must be ok to do so - otherwise VAT claims during registration but before VAT submission are limbo land).

Cheers, PG

As the HMRC docs say, as long as the purchases were made in the company name, you should be fine to reclaim these as you obviously weren't on the FRS at the point of your initial VAT registration (or prior to it). Obviously you still need valid VAT invoices in YourCo's name to support your claim.

[PurpleGorilla]

Thanks guys, my interpetation too is that it is ok (and it surely must be ok to do so - otherwise VAT claims during registration but before VAT submission are limbo land).

Cheers, PG

[Martin at NixonWilliams]

Here is the deal.

• Registered for VAT (01/01/14).
• Also now registed for FRS (from Feb-Mar 2014).

We have some pre VAT-registration VAT expenses for startup goods (IT goods etc). We would like to claim the VAT back on this.

Been told by accountant that can't do this now VAT registered (in the process of filling in first VAT Quarterly return).

Have I made a boo boo - should the VAT have been claimed back prior to VAT reg/FRS reg?

Thanks,

PG

As NLUK says, VAT can be reclaimed, providing you meet certain conditions. See the following link for details:

HM Revenue & Customs: Purchases made before VAT registration

I hope this helps.

Martin

[northernladuk]

This page appears to say you can as well..

http://www.hmrc.gov.uk/agents/toolki...-input-tax.pdf

Flat Rate Scheme
A business using the Flat Rate Scheme (FRS) should not generally claim input tax on its VAT
Returns. Input tax may however be claimed on individual purchases of capital expenditure
goods with a VAT inclusive cost of £2,000 or more. Input tax cannot be claimed on goods
purchased for resale or to be leased, let or hired. Input tax cannot be claimed on expenditure
which relates to work performed on a capital item, for example the refurbishment or extension of
premises. A business which has newly registered for VAT may also claim VAT on stock and
assets on hand at the time of registration subject to the normal rules for such claims. If a
business using the FRS is required to account for acquisition tax on the purchase of goods from
a supplier elsewhere in the European Union (EU) this cannot be claimed as input tax unless it
relates to the pur

[northernladuk]

This page says you can...

Claim back the VAT on things bought before VAT registration | Courier Business Stuff

The good news is that you can still claim back the VAT on these pre-registration expenses even if you’ve registered under the Flat Rate Scheme (FRS).

Normally under the FRS you can only claim back the VAT on purchases of ‘capital assets’ costing over £2,000 including VAT; so as far as couriers are concerned usually just on the purchase of a van. When claiming the VAT on pre-registration expenses however you can claim back the VAT on all the purchases mentioned above as if you weren’t on the FRS. So if you were to buy your new laptop 2 weeks before you registered for VAT on the FRS then you’d still be able to claim the VAT back on it. If you bought it just after registering for VAT on the FRS you wouldn’t be able to claim the VAT unless it had cost you £1702.13 plus VAT (£2,000) or more.