VAT registration date

Wrenchie

Hi! Hoping someone could help me again please/

I have got a new client who provides mobility equipment to registered disabled customers in their homes. This is zero rated for VAT and they are currently under the VAT threshold. However it is a good idea for them to register and I noted on the HMRC website that they can backdate the date of registration by 3 years. If I put the date of restration to 1 August 2008 which is when they started to trade, can they reclaim the VAT on all purchases from that date, including items which they do not have as stock?

Many thanks

jilt

My understanding is that they can only claim back the VAT on items not fully used up, ie stock that they still hold or fixed assets asn equipment etc. Check on http://www.hmrc.gov.uk/vat/start/register/purchases-before.htm

K H

I believe the three year rule relates to assets on hand at registration that were acquired in the three years prior to registration.

i'm not aware of any scheme that allows you to backdate registration, unless you've been naughty of course and have to.

jilt

Thanks KH I mean't to add that. Was rushing as my boss is in and loitering :laugh:

Wrenchie

The HMRC website states under Voluntary Registration: "You may be able to backdate your voluntary VAT registration by up to three years. You will have to account for VAT on any VAT taxable supplies you've made after your chosen date, and you won't be able to reclaim any VAT on your purchases unless you have the right evidence, and meet the other conditions for reclaiming VAT."

I know that under normal circumstances you can only claim VAT back on purchases that are in stock at the date of registration, but am finding the above statement a bit ambiguous. If you have to pay VAT on supplies from the date of back dated registration, can you also claim it back on purchases? My client provides mainly zero rated supplies so this would obviously be great if he can reclaim purchases from the past year.

deanshepherd

You can indeed backdate registration (although only on first application for registration) and, in the case of a zero-rated trader, you will be able to claim all input tax incurred since that date in addition to any pre-registration VAT claimable under the normal rules.

However, I do not believe HMRC are under any obligation to accept the backdating so they may seek to question any application going back more than, say, a year without any commercial justification.

Psyche

Somewhat related -- If a client is intending to register for VAT and in the process of setting up a limited company, can they send an invoice including VAT while their registration application is still pending? Or would it be best to advise them to wait until they receive their VAT registration number?

deanshepherd

They cannot send an invoice including VAT but they can send an invoice marked up by 15% stating that VAT registration is pending and a VAT invoice will follow in due course.

I would advise waiting until at least the company was formed before sending out such an invoice.