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bigduckontax, Accountant
Category: Tax
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I'm looking to voluntarily register for VAT (it will most

Resolved Question:

I'm looking to voluntarily register for VAT (it will most likely be necessary soon anyway), and want to understand what VAT I will be able to reclaim in the 6 months prior to the registration date. The reason I'm unsure is that I operate a digital marketing business that works with clients on an ongoing monthly basis. So the client will pay me at the start of the month, we will then carry out a variety of work for them during that month, all of which will conclude by the end of the month in time for us to restart again the following month. The question I have centres around the sub-contracted services I hire in during the course of a month's project, which are invoiced with VAT. For the 6 months prior to the VAT registration date, would I be able to reclaim the VAT on these services, bearing in mind the actual work I was invoiced for would have been concluded within the 6 months, although the overall project with the client would still be ongoing past the dat of VAT registration, and in some cases I would still be working with the same sub-contractors who would be providing the same services.
Submitted: 8 months ago.
Category: Tax
Expert:  bigduckontax replied 8 months ago.

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

Customer: replied 8 months ago.
Hi Keith. Thanks for the response - did my question make sense, I was trying to find the clearest way to word the situation?
Thanks.
Expert:  bigduckontax replied 8 months ago.

Hello, I am Keith, one of the experts on Just Answer, and pleased to be able help you with your question. Please do not make any supplementary questions before you have received my reply or you may loose my response.

When your turnover in any one year reaches 83K you must register and account for VAT. Any VAT from sub contractors are then an input tax which can be reclaimed quarterly. Here is the advice from the Gov UK web site in this matter:

'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'

As you are probably aware once registered for VAT meticulous book keeping, invoicing and retention of records is essential. I recall a VAT inspector demanding to see the receipt for 13p, yes 13 pence, of input tax reclaimed!

I do hope that you have found my reply of assistance.

Customer: replied 8 months ago.
Hi Keith. Apologies, this is the first time I've used this service - is the above your answer to my question or am I still waiting for it? Thanks.
Expert:  bigduckontax replied 8 months ago.

Yes it is, you may follow up if there is anything you do not understand.

Once registered you must render invoices to customers bearing an unique number, date of supply, cost of supply, VAT charged and quoting your VAT number. If you are making exports outside the EU then these are subject to VAT but at a rate of 0%.

Customer: replied 8 months ago.
Hi, but that doesn't answer my question. I'm wanting to understand if I'm going to be able to reclaim VAT on invoices for services I required in the 6 months prior to the date of registration?
Expert:  bigduckontax replied 8 months ago.

Yes, assuming HMRC grant you registration then you can reclaim input tax as explained:

'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'
Customer: replied 8 months ago.
Even if the services I want to reclaim the VAT on were concluded in the 6 months prior to the registration date - i.e. the service that was subject to the VAT I want to claim back is no longer being provided? Thanks.
Expert:  bigduckontax replied 8 months ago.

Indeed.

Please be so kind as to rate me before you leave the Just Answer site.

bigduckontax, Accountant
Category: Tax
Satisfied Customers: 3607
Experience: FCCA FCMA CGMA ACIS
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Customer: replied 8 months ago.
Thanks.
Expert:  bigduckontax replied 8 months ago.

Thank you for your support.

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