quick question on VAT

imeldabye Registered Posts: 147 πŸŽ† 🐘 πŸŽ†
hi there
a new client is starting up in business running a mobile coffee van. can she claim the input vat back on the van? she has put a seed of doubt into my head as she says she read somewhere that the vat is not recoverable as it is a start-up cost. i have searched this on hmrc web site but can't find a definitive answer - does anyone know?


  • Monsoon
    Monsoon FMAAT, AAT Licensed Accountant Posts: 4,071 πŸŽ† 🐘 πŸŽ†
    Of course VAT is recoverable on start-up costs.
    If there's any private use of the van then you might not be able to reclaim all the VAT (VAt rules do my head in, I always have to look them up).
    But, as long as it's actually a van then yes of course she can claim the VAT back.
  • PaulPSB
    PaulPSB Registered Posts: 55 πŸ’« 🐯 πŸ’«
    Just a quick thought - I agree your client can reclaim VAT on all start up costs but are you sure she should register for VAT at all?

    If this is a mobile coffee/tea/sandwich type business most of her future purchases will have very little or no input VAT. Also she would need to sell a great deal of drinks & sandwiches to reach the VAT threshold so I wonder whether its worth registering until she hits the threshold?
    Remember if she registers for VAT some of her prices may need to be higher than her competitors and her potential customers are "Joe Public"
  • Sindy
    Sindy Registered Posts: 10 Regular contributor ⭐ 😼 ⭐
    Re: quick question on VAT


    Just as others have said, VAT is reclaimable on the van proportionately. I would suggest that your client should start keeping the invoices and receipts for future registration. Registering now would put him/her in a less competitive position.

    On the other side, it is not much of an attraction for someone that his/her sales are mainly for non-VATable customers to register for VAT. Maybe when the sales reached a compulsory registration limit. (One should also check if there is a way of negotiating with HMRC for exemption on registration based on the nature of trade, though I am not 100% sure).

    My reasons are these:
    Registering for VAT would increase the selling price automatically. Your client will be in the paying position to the HMRC - Output VAT will always exceed input VAT.

    This in turn causes avoidable administrative and compliance issues with VAT.

    When preparing accounts, your client can easily claim capital allowance on the total purchase price of the van - which is inclusive of VAT. (CA will be proportionate on the private use). Then, the VAT he/she is keen about is being sorted out indirectly.

    Hope this help.

  • JodieR
    JodieR Registered Posts: 1,002
    So long as the van wasn't bought more than 3 years before she registered/registers for VAT then she can claim the VAT back (or a portion of it, as mentioned above). But I totally agree that it's unlikely to be beneficial to her to register for VAT.
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