VAT Registration - Backdating Sales

[Paul Kelly ICHYB]

From HMRC:

You can reclaim VAT paid on goods or services bought before you registered for VAT if you bought them within:

• 4 years for goods you still have or goods that were used to make other goods you still have
• 6 months for services

You can only reclaim VAT on purchases for the business now registered for VAT. They must relate to your ‘business purpose’. This means they must relate to VAT taxable goods or services that you supply.


My question is what happens to pre-registration sales? You obviously have not charged VAT on these, so is there a backdated calculation on sales?

I am sure there isn't, but would appreciate comments from my learned friends!

 

[DWS]

You start to charge VAT on sales from your EDR otherwise you would just backdate your registration

 

[Paul Kelly ICHYB]

Great - as I thought.

Thanks

 

[Newchodge]

From HMRC:

You can reclaim VAT paid on goods or services bought before you registered for VAT if you bought them within:

• 4 years for goods you still have or goods that were used to make other goods you still have
• 6 months for services

You can only reclaim VAT on purchases for the business now registered for VAT. They must relate to your ‘business purpose’. This means they must relate to VAT taxable goods or services that you supply.


My question is what happens to pre-registration sales? You obviously have not charged VAT on these, so is there a backdated calculation on sales?

I am sure there isn't, but would appreciate comments from my learned friends!

Something I have never understood. If I buy a computer to use solely in running the business (I cannot provide the services I provide without the computer) prior to VAT regsitration, can I reclaim VAT paid? It is not a service, nor is it goods used to make other goods that I still have; so if I can claim, what is the basis of the claim?

 

[Paul Kelly ICHYB]

You are/have been using it to make other goods i.e. the product of your business. I do not think it specifies that the goods need to be physical!

 

[Newchodge]

You are/have been using it to make other goods i.e. the product of your business. I do not think it specifies that the goods need to be physical!

Although it clearly separates goods and services - what I 'make' is services!

 

[Paul Kelly ICHYB]

Me thinks our learned friends need to jump in at this point!

I have always taken this that all relevant costs incurred in the business can be accounted for.

 

[NicoJ]

Something I have never understood. If I buy a computer to use solely in running the business (I cannot provide the services I provide without the computer) prior to VAT regsitration, can I reclaim VAT paid? It is not a service, nor is it goods used to make other goods that I still have; so if I can claim, what is the basis of the claim?

For the purposes of VAT reclaim - "goods" are assets. A computer would be an asset which, if still held by the business at the time of registration, could have VAT reclaimed. The other big asset would be stock, so anything that you bought for resale but had not yet sold at the time of registration would be eligible for VAT reclaim.

Services are telephone, broadband, professional fees etc which would not have expired (i.e been used) bu the EDR.

 

[MyAccountantOnline]

From HMRC:

You can reclaim VAT paid on goods or services bought before you registered for VAT if you bought them within:

• 4 years for goods you still have or goods that were used to make other goods you still have
• 6 months for services

You can only reclaim VAT on purchases for the business now registered for VAT. They must relate to your ‘business purpose’. This means they must relate to VAT taxable goods or services that you supply.


My question is what happens to pre-registration sales? You obviously have not charged VAT on these, so is there a backdated calculation on sales?

I am sure there isn't, but would appreciate comments from my learned friends!

No, no backdated calculation on sales.

The principle behind being able to recover VAT on some costs incurred before the date of registration is that you are recovering VAT on costs incurred to make sales on which VAT is charged.

 

[Paul Kelly ICHYB]

Thank you.

 

[Newchodge]

Me thinks our learned friends need to jump in at this point!

I have always taken this that all relevant costs incurred in the business can be accounted for.

I have always taken it that way too, but each time I see the definition of claimable pre-registration costs, I wonder!

 

[DontAsk]

My question is what happens to pre-registration sales? You obviously have not charged VAT on these, so is there a backdated calculation on sales?

I am sure there isn't, but would appreciate comments from my learned friends!

You can only reclaim the VAT on stock that you still hold. Anything you sold, you sold as a non-VAT registered, did not charge VAT on them, cannot reclaim the VAT, and so there is no VAT calculation to be made for them.

 

[Daybooks]

From HMRC:

You can reclaim VAT paid on goods or services bought before you registered for VAT if you bought them within:

• 4 years for goods you still have or goods that were used to make other goods you still have
• 6 months for services

You can only reclaim VAT on purchases for the business now registered for VAT. They must relate to your ‘business purpose’. This means they must relate to VAT taxable goods or services that you supply.


My question is what happens to pre-registration sales? You obviously have not charged VAT on these, so is there a backdated calculation on sales?

I am sure there isn't, but would appreciate comments from my learned friends!

To confirm what is being said, you must only account for VAT on your sales from the effective date of registration. You simply do not have the registration to do it earlier. Your registration date must be the normal required mandatory date unless you opted for an earlier date. Therefore there is nothing to report or pay on those pre-registration date sales.

The pre-registration recovery of some input (purchase) VAT is allowable under the law. However there are also rules when you de-register and may need to account for some claimed inputs back.

All the goods or services need to be used for your taxable supplies (standard, reduced, zero) in order to have their input tax recoverable. Taxable supplies is important because if you make goods or provide services that are exempt from VAT then anything purchased and directly attributable to those sales cannot be recovered. Where you have both taxable and exempt supplies you must therefore directly allocate purchases accordingly; with only the taxable ones recoverable. Where your purchases cannot be directly apportioned as with most overheads than a partial exemption calculation is required. If you have no exempt supplies then all is recoverable, subject to normal rules. Items which have a personal element should have that amount excluded.

Computers for example are (if) wholly and necessarily required for your business and as such you have a right of recoverability.

Welcome to Making Tax Digital (or is that Difficult) for VAT. Don’t forget about “reverse charge” where applicable.

 

[Paul Kelly ICHYB]

Many thanks for all of your responses.

 

[DontAsk]

Welcome to Making Tax Digital (or is that Difficult) for VAT.

I found it incredibly easy and painless.

 

[Daybooks]

I found it incredibly easy and painless.

Do tell Jim Harra. He will be delighted to hear from you and may invite you along to his next meeting with the Public Accounts Committee.