Input tax when VAT paid on goods and services received before VAT registration

Before a business is registered for Value Added Tax (VAT) in the UK, the VAT paid on goods and services received cannot be considered as input tax. However, once registered, the VAT paid before registration can be treated as input tax if certain conditions are met.

For goods

1. The goods were supplied within four years before the business was registered.
2. The goods were supplied to the currently registered person.
3. The goods were obtained for the business that is now covered by the VAT registration and used for taxable activities.
4. The goods are still held by the business or have been used to make other goods that are still held.
5. A stock account must be compiled, showing quantities and dates of when the goods were obtained, and if any goods were used or disposed of after VAT registration, details must be provided.

It’s important to note that goods completely used up before registration are not eligible for VAT recovery.

For services

1. The services were supplied within six months before the business was registered.
2. The services were supplied to the currently registered person.
3. The services were received for the purposes of the business covered by the VAT registration and related to its taxable activities.
4. The services were not related to goods disposed of before registration.
5. An account must be compiled, describing the services and the dates they were received, and if the services related to goods disposed of after VAT registration, details must be provided.

If the business is a corporate body, there are specific rules:

• VAT on goods or services obtained before incorporation cannot be reclaimed.
• However, if the goods or services would meet the conditions stated above, they can be treated as input tax if they were obtained or imported by a person who became a member, officer, or employee of the corporate body and was reimbursed for the full cost.