Claiming back pre-trading VAT costs

Posted on 5th December 2022 by Streets Value Added Tax


Image to represent Claiming back pre-trading VAT costs

There are special rules that determine the recoverability of pre-trading VAT costs. Pre-trading VAT costs describe VAT that was incurred before a business registered for VAT and is known as pre-registration input VAT.

There are different rules for the supply of goods and services, but VAT can only be reclaimed if the pre-registration expenses relate to the supply of taxable goods or services by the newly VAT registered business.

The time limit is backdated from the date of registration and is:

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

The VAT should be reclaimed on the business's first VAT return. When a new VAT registration is applied for it may be possible to backdate the registration (known as the effective date of registration). This should be considered if there is additional input tax that will be made recoverable.

There are special rules for partially exempt businesses and for businesses that have non-business income and for the purchase of capital items within the Capital Goods Scheme (CGS).


No Advice

The content produced and presented by Streets is for general guidance and informational purposes only. It should not be construed as legal, tax, investment, financial or other advice. Furthermore, it should not be considered a recommendation or an offer to sell, or a solicitation of any offer to buy any securities or other form of financial asset. The information provided by Streets is of a general nature and is not specific for any individual or entity. Appropriate and tailored advice or independent research should be obtained before making any such decisions. Streets does not accept any liability for any loss or damage which is incurred from you acting or not acting as a result of obtaining Streets' visual or audible content.

Information

The content used by Streets has been obtained from or is based on sources that we believe to be accurate and reliable. Although reasonable care has been taken in gathering the necessary information, we cannot guarantee the accuracy or completeness of any information we publish and we accept no liability for any errors or omissions in material. You should always seek specific advice prior to making any investment, legal or tax decisions.


Expert insight and news straight
to your inbox

Related Articles


Business VAT responsibilities

The taxable turnover threshold that determines whether businesses should be registered for VAT is currently £90,000. Businesses with turnover below this level can also apply for a voluntary VAT registration. Businesses charge VAT on their sales.


Are mega sized marshmallows zero-rated?

In the UK most basic food stuffs are zero rated. However, the definition of 'basic' is not straightforward and many of the foods are zero rated as a result of historical legislation dating back to the introduction of VAT in 1973. Famously, cakes are


VAT responsibilities for businesses

The taxable turnover threshold that determines whether businesses should be registered for VAT is currently £90,000. Businesses with turnover below this level can also apply for a voluntary VAT registration. Businesses charge VAT on their sales.


You might also be interested in...