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VAT Pre registration claims

Calculator KeyPadBecoming VAT registered can often be viewed as a daunting process. Not only do you now have more reports to file with HM Revenue and Customs, but you also need to ensure you’re managing your cashflow effectively, in order to make any VAT payments on time.

Some of you may or may not be aware you can claim back VAT on certain expenditure which you incurred prior to becoming VAT registered. This article gives a brief introduction of some of the rules surrounding a pre-registration claim.

It is important you take the time to review each item of expenditure when you plan to claim back the VAT.

A general rule is, if the purchase of goods or services hasn’t been fully consumed by the VAT registration date then you can start to think about claiming back the VAT portion.

For example, if you purchased a product for resale and you paid VAT when purchasing a product, then, as long as that same product is still held within your stock when you become VAT registered, you can reclaim this VAT.

It is important to note that expenses directly relating to income invoiced prior to registration cannot be reclaimed.

The time limit for reclaiming VAT on goods or services are:

  1. 4 years for goods and assets that you still have, or which were used to make up goods that you currently own
  2. 6 months for services *

To make the claim you need to enter the adjustment in box 4 on your first VAT return, the corresponding double entry would reduce the expense.

It is important that you keep accurate records of any adjustments to your VAT return. Your records should show that VAT was incurred in the first place, and why you have been able to reclaim the amount i.e. how the expense relates to your business at registration date.

You will also need to make further adjustments if you’re attempting to reclaim VAT on items you use for personal use, or if you’re a partly exempt business.

At Harris Accountancy, we find it’s common for CIC’s and Social Enterprise’s income to be made up of a mix of trading and grant income. This would most likely result in a partial exemption calculation (also referred to as POT calculation).

Depending if the grant funding is VAT exempt, you will not be able to recover VAT on expenses relating to the exempt income. If you believe your organisation is partially exempt, feel free to contact us for support around what you can and cannot reclaim.

You can find more information about this on using the HMRC website :

We would recommend seeking advice from an accountant prior to submitting your VAT return.

* Additional rules apply for services.


Article written by Lewis Formon


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