Voluntary VAT Registration

Carole Registered Posts: 57 Regular contributor ⭐
A builder is just about to go self employed. Their turnover will be well below the VAT threshold. He will have a lot of start up costs for van and tools etc. All his clients will be private householders.
If he chooses to voluntarily register for VAT in say 5 months time HMRC will allow him to claim the VAT on these purchases. I cannot see anywhere in the legislation that states that he will have to then pay over VAT on backdated sales.
Alternatively what is to stop him from registering for VAT initially, claiming all the VAT on start up costs and then de-registering later once his costs are minimal.
Just want to get this clear in my head!


  • RyanMIP
    RyanMIP Registered Posts: 50
    In your “five months [sic] time” example, the answer is yes. I’m sure you know the actual time limits and restrictions as you have looked at the legislation.

    You cannot see anything in the legislation about “pay[ing] over VAT on backdated sales” as there is no such thing in the legislation.

    What stops the input tax advantage in your final example? Schedule 4, Paragraph 8, is what.
  • douglasstroud
    douglasstroud Registered Posts: 295 Dedicated contributor 🦉
    He will be able to claim any input tax on goods bought within the previous 4 years as long as they are still owned at the date of registration and on any services provided for the business in the 6 months prior, he will only have to charge VAT on his sales from the date of registration.
    If he was as you say just to register initially claim the start up costs and then de-register then VAT will need to be accounted for on any assets that input tax has been claimed which remain in the business, this will be a deemed supply and valuation will normally be based on purchasing identical goods and the output tax paid on the final VAT return, but only if the VAT on the deemed supply is more than £1,000.

    You may also need to consider the additional 20% in VAT that he will be having to charge the private householders who will be unable to reclaim this, it may not make his prices as competitive as others.

  • Carole
    Carole Registered Posts: 57 Regular contributor ⭐
    Thank you both for your replies. Very useful.
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