A person is a bathroom fitter and was VAT registered from January 2017 to March 2018 as he had a contract with a large developer to fit en-suites into new-build dwellings. His supplies were mostly zero-rated and he received repayments of VAT from HMRC. He bought a new commercial vehicle and specialist tooling in August 2016 on which he recovered the VAT as pre-registration input tax. On his final return, for the tax period ending 31st March 2018, he accounted for VAT on all the assets and stock on hand as a deemed supply and de-registered for VAT as he was below the threshold. 
He has now been approached by another developer to install bathrooms and will look again to VAT register in order to recover his input tax. His Effective Date of Registration (EDR) will be 1st April 2019. 

Answer 1: 

He can recover pre-registration input tax on new tooling and stock on hand at registration that he purchased earlier in 2019. 
Can he also recover the input tax on the commercial vehicle and the tooling purchased in 2016 as pre-registration input tax again? 

Answer 2: 

Regulation 111 entitles businesses that buy goods and services prior to VAT registration, to be used for its taxable activities after registration, to recover the VAT as input tax provided that: 
the goods, whether stock for resale or fixed assets, remain on hand at the EDR (Effective Date of Registration) and have been bought within four years of that date, and 
In the case of services, the supply was received within six months of the EDR and those services haven’t been supplied as part of a supply made prior to registration, weren’t services on goods no longer on hand at registration, and weren’t services on assets acquired more than four years prior to registration. 
He cannot recover the VAT on the original purchase of those goods again, but HMRC confirm in their Input Tax manual that when a business re-registers, provided those goods continue to be used in the course of his business, the business can treat the VAT accounted for on the deemed supply of the assets as input tax. The evidence required is proof of payment of VAT on the deemed supply on previous de-registration. The VAT should be reclaimed on the first period return when he re-registers. 

Questions or queries? 

Please do let us know if you have any questions or if you need any further help understanding the guidance – please call us on 01932 564098 or message us here. 

Information correct at time of publication 

This tax Q&A was published in June 2019 – please be aware that the information above may have changed in subsequent months. This note is written for the general interest of our clients and is not a substitute for consulting the relevant legislation or for taking professional advice. 
This content was originally produced by Croner Taxwise Limited and is reproduced with their permission. 
Tagged as: VAT
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