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VAT Voice by Steve Allen

Steve Allen, Director of VAT Solutions (UK) Ltd, explains how to claim back input tax after deregistering your business for VAT.

Why deregister?

There can be many reasons why you deregister a business; retirement, insolvency, selling the business, making a company dormant, ceasing to make taxable supplies, or falling below the VAT deregistration limit. Once you have deregistered for VAT, most people think that you can no longer reclaim any VAT. However, there are circumstances when you can still get some VAT back from Customs.

Making a claim

You may use Form VAT 427 (VAT 426 if your business is insolvent) to claim input tax on goods or services supplied to you for business purposes while you were registered that you didn't claim on either your normal returns or on your final return. For example, it may be that you hadn't received the necessary evidence (e.g. a VAT invoice) to make the claim by the time your final VAT return was due. Subject to the 3-year limit for reclaiming VAT, you will still be able to claim a repayment of VAT, using Form VAT 427, once you receive the invoices. The VAT 426/427 form can be obtained from the National Advice Service or downloaded from Customs website (www.hmce.gov.uk).

You can also use Form VAT 427 to make a claim for input tax where you made an error while registered, and didn't make a claim at the right time despite holding the proper evidence. You must provide invoices confirming that the goods or services were purchased before deregistration. You should make the claim, which is also subject to the 3-year limit, as soon as possible after cancelling your registration. However, bear in mind that any payment due to you could be delayed if your business bank account has been closed.

VAT on services

In addition, you can also claim the VAT back on services that you receive after deregistration, provided they relate to your business activities while you where VAT registered. For example, you deregister for VAT on 1 March 2004, because your turnover has fallen below the deregistration threshold, and send in your final VAT return in by its 31 May 2004 due date. However, as your annual accounts year finished on 28 February, it wasn’t until September 2004 that your accountant had time to complete your accounts and send you the bill. Using a VAT 427, you can claim the VAT back because it relates to the time when you were registered for VAT. Please note that these claims are also subject to the three-year cap, starting from the date of the invoice sent to you.

If your business is partly-exempt, the normal ‘de-minimis limits’ do not apply, and any VAT relating to an exempt supply cannot be reclaimed. With regard to non-attributable input VAT, the recoverable proportion applicable immediately prior to deregistration should be used.

Groups and TOGCs

If your business is registered as a VAT group and a member leaves the group registration but does not register in its own right, the representative member may recover VAT incurred by the departed company after the date it leaves.

Where a business is transferred as a going concern (‘TOGC’), and the VAT registration number is to be retained by the purchaser of the business, the transferor is entitled to submit a claim for deregistration expenses. The claim is to be submitted in the usual manner on Form VAT 427.

Customs will need original documentation (i.e. invoices, supporting evidence etc) to be sent with the VAT 427 claims form.

There is now a centralised team where all completed forms and original documentation should be submitted:

Accounting Adjustments (VAT 427 team)
3rd Floor Southeast
Queens Dock
Liverpool
L74 4AA

Once Customs have agreed your claim, the original invoices will be stamped and returned to you.

Steve Allen
Director, VAT Solutions (UK) Ltd
Email: steveallen@vatsolutions-uk.com

VAT Solutions (UK) Ltd
11 Winmarleigh Street,
Warrington,
WA1 1NB

(T) 01925 242497
(F) 01925 242498
(M) 07810 433927
(W) www.vatsolutions-uk.com

VAT Solutions (UK) Limited is an established independent firm of Chartered Tax Advisers, formed by Andrew Needham and Steve Allen. The company has a cross-section of clients from multi-national companies through to medium-sized and numerous smaller regional firms of accountants and solicitors. They produce a regular publication 'VAT Voice', which can be downloaded directly from the Internet via the following address: www.vatsolutions-uk.com/newsletter.doc