Not all businesses need to straight away, but if you do register for VAT then you may be able to reclaim VAT you paid on purchases you made before registering.
Businesses don’t need to register for VAT until their turnover reaches the VAT registration threshold for the previous 12 month period. But, even if you don’t need to register just yet, you’ll still pay VAT on most of the goods and services that you buy for your businesses. In this article, we’ll explain the rules, restrictions, and how to reclaim VAT on pre-registration purchases.
How far back can I reclaim VAT paid before registering?
There’s a time limit on how far back you can go to reclaim the VAT on purchases made before registering. The time limits are different for goods and services.
Restrictions on reclaiming VAT on goods bought before registering
You can only reclaim VAT on goods that you buy specifically for business use. To reclaim the VAT on purchases that you made before registering, the goods must still be owned, used, or in stock, including goods bought to make other goods that you still have.
You bought a laptop 3 years ago to help you run your business, and paid a cost of £1,000 + VAT, for a total of £1,200. At the time you weren’t VAT registered, but now you are. As long as you still use the laptop for business purposes, and have the original receipt, you’ll be able to claim back the £200 in VAT that you paid.
Reclaiming VAT on services purchased before registering
You can claim back VAT for services that you purchased up to 6 months before you became VAT registered, as long as those services relate to your business. Again, you’ll need receipts!
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Are there any exceptions on reclaiming VAT?
Not all goods and services are eligible for VAT, so there may be some purchases where you have nothing to reclaim. There are also restrictions on goods that you’ve already used up, such as petrol or electricity, and goods that you sold or supplied before you registered for VAT.
Exceptions also apply for the VAT on any services which relate to goods that you disposed of before becoming VAT registered.
How do I reclaim VAT incurred before registering?
Once you identify which services and goods you can claim VAT back on, you’ll need to provide proof of cost and date of purchase. You must also provide evidence that these purchases are still relevant for your business today. For instance, you will need:
Invoices and receipts
A description of what the goods or services are
Date of purchase
A summary of how they still relate to your business
You’ll need to include any claims for pre-registration purchases on the first VAT return that you submit once you register.