As an SME is it possible to deduct VAT incurred prior to when I registered my company for VAT?

There’s long been uncertainty regarding the stance of HMRC on the deduction VAT incurred prior to a company’s registration for VAT. This led to inconsistent treatment of output VAT on such assets. Our Bolton Accountants can help you calculate if you are owed any VAT.

HMRC hasn’t changed their policy, just clarified that VAT on services received within 6 months of registration and used in the business at the date of registration is recoverable in full.  VAT on stock is deductible to the extent that the goods are still on hand at registration.  VAT on fixed assets purchased within four years of registration is recoverable in full, providing the assets are still in use by the business at registration.

Essentially, whilst VAT on services incurred leading up to registration can continue to be claimed in full, there may be some apportionment required for recovering the VAT on stock on hand to take into account any pre-registration consumption, which could present a further squeeze on start-up businesses.

Positively, however this clarification paves the way for reclaims of under claimed input tax if VAT had been restricted to reflect pre-registration use, or if HMRC raised an assessment to account for pre-registration use.

When looking at recovery of pre-registration expenditure it is important, because of the time limits, to ensure that the date of registration is the most beneficial for recovery of VAT.

Although many businesses wait until a compulsory registration is necessary, it is possible to register on a voluntary basis, providing that taxable supplies are being made / intended.

A registration date that maximises input tax recovery can therefore be arranged but it’s important to get this date right, first time.

For more help with finances contact our CHW Bolton Accountants team via our enquiry form or call 01204 534 031.


This article is for general guidance only. It provides an outline, and may not include points which are important to your situation. You should not depend on this blog without taking advice based on the full facts of your case. The information given was correct at the time of publication.

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