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My business registered on the 1/3/16, but was supplied goods

Resolved Question:

Hi. My business registered for VAT on the 1/3/16, but was supplied goods from the EU in the period 1/12/15 - 28/2/16 and VAT was charged on the supply of these goods.
Can I claim back the VAT charged between 1/12/15 - 28/2/16 or recover it from the EU in anyway?
Kind regards
Submitted: 9 months ago.
Category: Tax
Expert:  bigduckontax replied 9 months ago.

Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question.

Here is the advice from the Gov UK web site on this matter:

'6. Purchases made before registration

There’s a time limit for backdating claims for VAT paid before registration. From your date of registration the time limit is:

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

You can only reclaim VAT on purchases for the business now registered for VAT. They must relate to your ‘business purpose’. This means they must relate to VAT taxable goods or services that you supply.

You should reclaim them on your first VAT Return (add them to your Box 4 figure) and keep records including:

  • invoices and receipts
  • a description and purchase dates
  • information about how they relate to your business now'

The first return after registration will invariably be skewed. You may reclaim the VAT for the goods supplied 1 Dec 15 - 28 Feb 16 on that first return.

I do hope that my reply has been of assistance.

Customer: replied 9 months ago.
HiI am aware of this general advice from Gov UK. However the supplies were from the EU and the Vat office has denied my business the Vat claim and has stated that it is a careless inaccurate claim. The advice I need is to do with trading with the EU.
Expert:  bigduckontax replied 9 months ago.

Supplies within the EU are normally standard rated unless subject to the reverse charge, but that only applies to the seller's VAT account. The buyer will have been charged VAT on the invoices and the input tax can be reclaimed in box 4 of the VAT 100.

I am at a total loss to understand the attitude of the VAT offices advice. You should take this up with the office concerned as a formal complaint. It shows a very limited understanding of VAT trading.

Customer: replied 9 months ago.
HiThe response from the VAT office is:".. however this unfortunately does not change the fact EU VAT incurred either prior to UK VAT registration or subsequently, in the case of services which would have been subject to the Reverse Charge rules, is not recoverable as Input VAT via your UK VAT return".Is their ruling that EU VAT charged on services before registration not reclaimable if those services would be subject to the reverse charge rules following registration?Very best
Expert:  bigduckontax replied 9 months ago.

Yes, but were the goods supplied by the EU supplier subject to the reverse charge? If they were not then the input tax is reclaimable. HMRC have only given you half the answer and, inevitably, that which is in their favour. For example, if the input taxes were actually levied by Customs on importation of goods, then there would be no reverse charge.

The treatment of imported goods subject to the reverse charge is as follows [source: Avalara VAT Live]:

' When the Reverse Charge is applied, the recipient of the goods or services makes the declaration of both their purchase (input VAT) and the supplier’s sale (output VAT) in their VAT return. In this way, the two entries cancel each other from a cash payment perspective in the same return.'

bigduckontax, Accountant
Category: Tax
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Experience: FCCA FCMA CGMA ACIS
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Expert:  bigduckontax replied 9 months ago.

Thank you for your support.

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