Pre-registration VAT on materials purchased to make a fixed asset!

imeldabye
imeldabye Registered Posts: 147 ? ? ?
Hi all. LLP is design/make furniture agency now registered for VAT. I am preparing first Return (cash accounting basis). Client is compiling list (all backed up with receipts of course) of invoices which he paid vat on pre-registration for equipment still being used in business- ie assets. However, he asked me today about materials he purchased for making furniture actually used in his studio- eg meeting table, shelving etc. Can he claim the vat back on these purchases does anyone know? Also-for furniture he made to use in exhibitions and trade shows which is now unsold - is this stock to be valued, or accounted for as marketing costs would you think? Any ideas gratefully received :biggrin:

Comments

  • reader
    reader MAAT, AAT Licensed Accountant Posts: 1,037
    Firstly I would ask the question, if he begins to recover pre-registration input tax should he then be paying pre-registration output tax; I'm not sure.

    I would have thought that he would be able to claim back the input tax on the materials used to make the furniture provided that he still has the furniture and he did not buy the materials more than 4 years ago.

    If he intends to sell his unsold exhibitions items then yes I would say it is stock and it should be valued at the lower of cost and net realisable value. I don't think I would write it off to marketing as it sounds like the exhibition items will still be in the business in the next accounting period. If he intends to use thee furniture in the business as "fixture and fittings" you could capitalise the items. Alternatively, if he decides to dump the exhibitions items then you should probably write off the advertising/marketing.
  • reader
    reader MAAT, AAT Licensed Accountant Posts: 1,037
    http://www.hmrc.gov.uk/vat/start/register/purchases-before.htm

    No, looks like he can recover input tax going back 4 years on goods (fixed/current assets) still held and 6 months on services without having to account for output tax.
  • wildgoose1uk
    wildgoose1uk Registered Posts: 200 ? ? ?
    I think you may find there is a condition that the goods have to form part of a taxable supply of goods which is unlikely to be met if they are not for resale and are use for meeting tables etc.
  • reader
    reader MAAT, AAT Licensed Accountant Posts: 1,037
    I think you may find there is a condition that the goods have to form part of a taxable supply of goods which is unlikely to be met if they are not for resale and are use for meeting tables etc.

    "The word 'goods' includes goods that are intended for resale, and also goods that you keep as assets, such as computer systems, shop fittings, office equipment and furniture, tills, vans and other equipment."

    I say recover the input tax. Put the claim in and see what HMRC make of it. Don't ask, don't get.
  • Monsoon
    Monsoon FMAAT, AAT Licensed Accountant Posts: 4,071 ? ? ?
    reader wrote: »
    "The word 'goods' includes goods that are intended for resale, and also goods that you keep as assets, such as computer systems, shop fittings, office equipment and furniture, tills, vans and other equipment."

    I say recover the input tax. Put the claim in and see what HMRC make of it. Don't ask, don't get.

    Agree. If bought in the last 4 years, if the physical items are still in the hands of the business, claim the PRIV.
  • imeldabye
    imeldabye Registered Posts: 147 ? ? ?
    Good, I had decided to go this route. thanks all :001_smile:
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