HMRC denies new business VAT refunds

HMRC denies new business VAT refundsHMRC has changed its interpretation of a key VAT rule – newly registered businesses are now being denied VAT refunds.

HMRC hasn’t publicly announced this change in practice, so tax advisers and taxpayers have been potentially over-claiming input VAT on new VAT registrations.

What’s changed?

When an established business registers for VAT, it may already hold some stock and assets which will be used after the registration date in connection with its ‘VATable’ sales.

For over 40 years, traders have been able to reclaim all the input VAT paid on those goods on their first VAT return, as long as the following conditions were met:

  • Goods were acquired in the four years before the date of registration
  • Items were still held at the date of registration

However, if you ring the VAT helpline you may now be told that you are unable to reclaim all of the input VAT paid on those goods.

HMRC says the input VAT should be reduced to take into account the use that has been made of the goods before the VAT registration date. There has been no change in practice for VAT reclaims on services, which must be provided in the six months before registration.

HMRC denies new business VAT refunds

If you would like to find out more information, or would like general business accounting advice, give Omni Chartered Accountants a call today! Our number is 01902 837408 or of you can request a free of charge call-back from our website!

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