Not all businesses need to register for VAT straight away, but if you do then you may be able to reclaim any VAT you paid on purchases you made before registering.
In this article, we’ll explain the rules, restrictions, and how to reclaim VAT on pre-registration purchases. Just be aware you might need to pay a penalty if you fail to register for VAT at the right time!
Will I pay VAT if I’m not VAT registered?
Businesses don’t need to register for VAT until their turnover reaches the £90,000 VAT registration threshold for the previous 12 month period, but you’ll still pay VAT on most of the goods and services you buy for your business. The good news is that you may be able to reclaim the VAT you paid on those purchases, even if you paid it before you were VAT registered.
How far back can I reclaim VAT paid before registering?
There’s a time limit on how far back you can go to reclaim the VAT on purchases made before registering. The time limits are different for goods and services.
Restrictions on reclaiming VAT on goods bought before registering
You can only reclaim VAT on goods you buy specifically for business use. To reclaim VAT on purchases you made before registering, the goods must still be owned, used, or in stock (this includes goods you bought to make other goods you still have).
For example
You bought a laptop 3 years ago to help you run your business, and paid £1,000 + VAT, for a total of £1,200. At the time you weren’t VAT registered, but now you are. As long as you still use the laptop for business purposes and have the original receipt, you’ll be able to claim back the £200 of VAT you paid.
Reclaiming VAT on services purchased before registering
You can claim back VAT for services you purchased up to 6 months before you became VAT registered, as long as those services relate to your business. Again, you’ll need receipts!
Are there any exceptions on reclaiming VAT?
Not all goods and services are eligible for VAT, so there may be some purchases where you have nothing to reclaim. There are also restrictions on goods you’ve already used up, such as petrol or electricity, and goods you sold or supplied before you registered for VAT.
Exceptions also apply for the VAT on any services which relate to goods you disposed of before becoming VAT registered.
How do I reclaim VAT incurred before registering?
Once you identify which services and goods you can claim VAT back on, you’ll need to provide proof of cost and date of purchase. You must also provide evidence these purchases are still relevant for your business today. For instance, you will need:
- Invoices and receipts
- A description of what the goods or services are
- Date of purchase
- A summary of how they still relate to your business
You’ll need to include any claims for pre-registration purchases on the first VAT return you submit once you register.
Talk to an advisor about how we can your business with VAT help by calling 020 3355 4047, or get an instant online quote.
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The company is well below the £90K threshold. If we voluntary register to claim back Input VAT on assets that were purchased in the 4 years pre-registration, is there any time limit before we can then deregister (as still likely to be under the £90K threshold). Secondly, would HMRC try to claim any of the Input VAT that we had had recovered?
Hi Stuart
Thanks for your message. I am not aware of a time limit to deregister, but when you deregister you may need to repay VAT where input VAT was reclaimed on any goods or assets. This section of the HMRC guidance might help, but do let us know if there’s anything we can do.
Best wishes
Elizabeth
I have pre-registration goods purchases, but the receipts are not in the company name – is this an issue when trying to claim the pre-registration vat back? thanks.
Dear Gordon
Thanks for your message. HMRC may reject the expenses if the invoices are not company name (although if they are just receipts from a shop or something this will normally be ok as they have no name on).
You’ll also need to demonstrate that the items you bought were for the business, and are still in use by the business. Generally speaking this means assets purchased within 4 years and still held at the registration date, or services 6 months before the registration date and that were used to provide vatable sales.
Best wishes
Elizabeth
If I claim VAT back on pre-registration expenses, will I also have to pay VAT on invoices paid to me within the pre-registration period?
Hi Mark
Thanks for your question. Once you register for VAT, you can claim back the VAT you paid before registering (up to a time limit). But you won’t be able to charge VAT on your invoices until you register, so whilst you can claim back the VAT you paid in the pre-registration period, you won’t need to add VAT to your sales invoices, and therefore won’t collect any VAT that you need to pay on to HMRC.
Just make sure that you register in plenty of time!
I hope this helps, but please do let us know if there’s anything at all we can do for you.
Best wishes
Elizabeth