Recovering VAT on Purchases before Registration

Q: I recently registered my small retail outlet for VAT and read that I am able to reclaim all of the input VAT on goods I purchased,. (and subsequently sold) when I first started trading two years ago? Is this possible?

Sejal, Hornchurch.

A: Unfortunately not, you can only claim back the VAT on goods that you have acquired in the 3 years prior to registration which are still held in stock (or used to make other goods which are still held in stock) and originally acquired for the business purposes. This also includes VAT incurred on fixed assets you still use in your business.

You can also recover the vat incurred on services, which have been supplied within 6 months prior to becoming registered, assuming they were also supplied for the purpose of the business. Therefore, any VAT suffered on goods which have been sold on to customers cannot be re-claimed.

To reclaim VAT on these items you need to include the claim on your first VAT return. You should also carry out a careful stock check and record the quantities of goods and the dates when you obtained them. This will form the basis of the records you need to keep to validate your claim.

We provide tax accountancy services in Hornchurch and throughout the UK.  http://www.taxassist.co.uk