VAT application rejected – what to do now?

[Kasia]

Hi,

Please see the following message I received from HMRC:

‘HMRC is unable to proceed with your VAT registration application.
Based on the information you have provided HMRC are not satisfied that there is sufficient evidence to show that you are in business and either making or intending to make taxable supplies.
If you are not making taxable supplies or the only supplies that you are making are exempt supplies, you are not eligible to be registered for VAT.
Before HMRC can reconsider your application for VAT registration you will need to send HMRC supporting documentation, which should include some or all of the following:
copy of lease/tenancy agreement for your stated principal place of business
copies of business bank statements
copies of sales invoices you have issued to customers.
If you have not actually started to make taxable supplies yet:
copies of purchase or expense invoices for goods or setting up costs
copies of signed and dated contracts or agreements with suppliers and customers.'

I am option 2 – I haven’t started to make taxable supplies yet. How would you understand this message? I have recently bought company laptop and I have VAT invoice for that purchase. And also I signed agreement with a solicitor and received VAT invoice from her. Is it something HMRC might be happy with? I’m not sure, sorry… I mean, I am a start up company and I would like to register voluntarily for VAT – for many reasons, i.e. I will be trading with EU countries, I will be buying services there, I would like to ‘look bigger’ and I would like to understand how everything works when it’s small, so I can cope with it when it’s bigger. Moreover, I would need to issue VAT invoices for my suppliers – and if I’m not registered for VAT, they might not like to trade with me – as they’re VAT registered companies in EU.

So what would you suggest?...
Thank you and I look forward to your replies.
Kasia

 

[faradaykeynes]

There are many non vat business trading with EU, Reclaiming VAT on goods you bought before registration is possible provided certain conditions are met.

If you can show at least one transaction with your client to HMRC that should be enough poof for active trading

 

[Bob]

Are you renting premises or working from home? A laptop could just as easily be private as business. What will your business consist of? Do you have a website? What other business costs have you incurred? Are you trading as a limited company?

 

[Karimbo]

i also have a vat registered company which is very small and im a one man band. I had no problem getting vat registered and i dont even have a office premsis, im running it entirely from home.

Ive incorporated into a ltd company
i have a business bank account in the companies name
i DID NOT have an accountant at the time
business address was my home address - that raised an issue and caused a hiccup in the application process but eventually went through.
I did not make a single sale before being vat registered.

By my business plan was sound. I provide equipment for rental. I made it clear why I needed to be VAT registered and how it benefitted both me and the taxman in my reasons.
1) I'm going to purchase a lot of capital assets to supply to clients, so being vat registered is good for cash flow
2) im b2b and most of my customers and clients will be vat registered
3) i expect to make a profit (or net positive vat balance) by end of year 1.

I also had a sensible plan.

No offence OP, but it would appear that you have some sort of a lifestyle business or a consulting/contractor type business and you did not satisfy the person that you are a legit business and not someone who is going to purchase a lot of stuff from Europe using the reverse charge scheme and buggr off - that probably happens a lot and they are probably wary of that.

Do appeal and write a short succint business plan to make your case.

 

[Kasia]

Dear Karimbo, that's great advice - I've already spent all evening typing nice message to HMRC, I'll review it tomorrow and send it to them. You inspired me! Thank you so much!
Any other ideas anyone?...
Thanks
Kasia

 

[Red Wood]

Hi Kasia,

I have had the same issue. How did you get on with our dear friends over at HRMC? It seems like it is a catch 22 situation... Can’t do business without being VAT registered, can’t get VAT registered without being in business. huff.

 

[Kasia]

Dear Karimbo, that's great advice - I've already spent all evening typing nice message to HMRC, I'll review it tomorrow and send it to them. You inspired me! Thank you so much!
Any other ideas anyone?...
Thanks
Kasia

Hello Everyone! I made it! My second application has been accepted and I've been registered for VAT! Thank you for all your support - especially, thank you, Karimbo.
The most important thing is to be honest and prove that you're a real business - not just trying to register a company to claim the VAT back on some goods. Therefore, I explained in my 2nd application that my business needs long time to start operating - due to the nature of it, and I forwarded copy of agreement I've already signed with accountant, copies of e-mails with potential suppliers - and as I said: you just need to show that you're going to be a real business, that's it. The darkest place is under the candlestick
Good luck!
Kasia