Pre-registration costs clarified

Revenue and Customs Brief 16/2016 reiterates and clarifies HMRC’s policy on the deduction of VAT relating to assets used by the business before registration.

In essence services must have been received less than six months before the effective date of registration for VAT to be deductible. This excludes services that have been supplied onwards. VAT on services received within the relevant time limit can be recovered in full.

Goods have a four-year time limit for deduction. This excludes those that have been supplied onwards or consumed before registration. However VAT on fixed assets purchased within four years can be recovered in full.

The brief says the reason for clarification is the inconsistent interpretation of the word ‘consumed’ particularly in relation to business assets.

It also explains what businesses should do if the correct treatment has not been applied. The brief can be found in full on GOV.UK...