Question submission date: January 2023
Full Question: “Can I claim the VAT back on purchases I made before I was VAT registered?”
At the risk of stating the obvious, in order to claim back VAT on ANY purchases that you make, your business must be registered for VAT with HMRC.
Assuming that you have done that, let’s look at what you can claim and how far you can go back with your claims. Anything you claim must relate to your ‘business purpose’, the way HMRC define this is that they ‘must relate to VAT taxable goods or services that you supply’. This could include, for example, commercial vehicles, fuel costs, machinery and travel expenses.
If you have only just registered for VAT and previously made business related purchases you can still reclaim VAT on them if you bought them within the previous 4 years for goods (as long as you still have the goods) or they were used to make other goods that you still have; or within the previous 6 months for services.
This VAT must be reclaimed on a VAT return and if you are including purchases made before your VAT registration date, then they should be included on the first VAT return that you complete. You’ll need to have proof in the form of VAT invoices, and for smaller expenses such as petrol, you’ll need VAT receipts. However, for purchases less than £25 each you can claim back the VAT without a VAT receipt or invoice (assuming, of course, that the supplier is VAT registered).
There will always be occasions when you don’t have a receipt. That doesn’t mean you won’t be able to claim, but you will need to meet other criteria set out by HMRC. This could be evidence such as a supplier statement. Keeping hold of VAT receipts is going to make life easier for you in the long run though so do try and be organised and hold onto them. If you use bookkeeping software (we highly recommend FreeAgent) then these receipts can be uploaded to your software and the physical receipt can be disposed of.
It’s worth also mentioning here what you can charge VAT on. Obviously, you can’t charge VAT on invoices unless you are VAT registered but if you have applied and are still waiting for your VAT number to come through (which can take up to 14 days from the day you register) you should increase the value of your invoice by the appropriate VAT rate (20% on all standard rates supplies). You then need to re-issue those invoices with the correct VAT breakdown once your registration number comes through.
We’ve written a full guide on VAT here where you’ll find more information.
If you have any queries about claims or charges and whether you can make them, your accountant will be able to advise you. Likewise, if you need with your VAT return they’ll be able to assist or submit it for you. It’s always worth checking that you’re not making invalid claims that HMRC may dispute if you’re unsure.