ATXP6 UK
Syllabus A6. Value Added Tax A6a. The VAT registration requirements

A6a. Circumstances for pre-registration VAT can be recovered

Syllabus A6a)

The VAT registration requirements

Recovery of pre-registration input VAT

Input VAT incurred prior to VAT registration can be recovered on goods and services purchased in certain circumstances.

These include:

Purchased item Goods Services
Time limit? Cannot be acquired more than 4 years prior to registration. Cannot be supplied more than 6 months prior to registration
Purpose? Must be acquired for business purposes Must be acquired for business purposes
Still in hand? The goods purchased that pre-registration input VAT will be claimed on must still be in inventory prior to registration. Services are consumed immediately as they are provided. Therefore, this is not applicable. 

How do we claim the pre-registration input VAT?

We treat these goods/services as being purchased on the first day of VAT registration, therefore we will claim the input VAT when we file our first VAT return.

Illustration:

Sunny Ltd. registered for VAT on 31/01/2019.
He has to file his VAT returns quarterly, and his first return will be filed on 01/04/2019.
Sunny Ltd. purchased inventory for the business on 31/03/2018.
This inventory is still in stock. It’s VAT inclusive price is £120.
How will the input VAT for this purchase be treated?

Solution:

Sunny Ltd. will claim the £20 (input vat paid) on his first VAT return in 01/04/2019.
This is because these goods qualify to have pre-registration VAT claimed on them.
They are used for business purposes, still in stock and purchased within 4 years of VAT
registration.