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Steve Allen of VAT Advisers Ltd provides some useful tips on reclaiming input VAT.

Introduction

You can generally reclaim VAT on goods bought up to 4 years before your Effective Date of Registration (‘EDR’), and services bought up to 6 months before your EDR. Remember, you may be able to backdate your VAT registration by up to 4 years, making up to 8 years in total, although once your EDR has been agreed with HMRC, it cannot normally be changed.

VAT on Goods

You can reclaim VAT on goods bought or imported up to 4 years before the EDR if the following conditions are met:

• the goods were bought by the legal entity now VAT registered
• the goods are for taxable business purposes
• the goods are still on hand at the EDR or were used to make other goods still on hand at the EDR
• appropriate documentary evidence is held (i.e., a tax invoice, C79, or acceptable alternative proof), and a record kept of what has been claimed

You can't reclaim VAT on goods:

• consumed before the EDR (e.g., petrol, electricity, and gas)
• supplied [onwards] before the EDR, or used to make other goods supplied before the EDR
• relating to exempt supplies

VAT on Services

You can reclaim VAT on services bought up to 6 months before the EDR if the following conditions are met:

• the services were bought by the legal entity now VAT registered
• the services are for taxable business purposes, which means they must relate to taxable goods or services you supply
• appropriate documentary evidence is held (i.e., a tax invoice or acceptable alternative proof) and a record kept of what has been claimed

You cannot reclaim VAT on services:

• relating to goods disposed of before your EDR – e.g., repairs to a machine you sold before you were registered
• relating to goods or services you supply that are exempt from VAT

Pre-Incorporation Expenses

In addition to the above rules, the following conditions must also be satisfied:

• the goods or services must have been obtained for the benefit of the company or in connection with incorporating it
• the person who received the goods or services must have become a member, officer or employee of the company, and must not have been a taxable person at the time of supply
• the company must have reimbursed the person who received the goods or services, or given an undertaking to do so; and
• the goods or services must have been obtained for the purposes of a business to be carried on by the company