I am breaking my head trying to find out references on a normally simple case: company XYZ, that has projected supply of both taxable and exempt services, registered for VAT short after its incorporation and for the first two years it made no sales whilst being charged VAT on development of software and product building (that will end up in a taxable supply when released) and on general overheads.
On the third year, it has made supplies that are fully taxable. In the next years it is envisaged that both taxable and exempt supplies will be made.
Is VAT claimable in full for the first two years? Is it claimable on the projected proportion between taxable and exempt supply only (albeit at year end no sale has been made for the first two years)?
Is there guidance from VAT Manuals or Notices at HMRC?
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