1. Home
  2. UK Finance Discussions
  3. Retrospectively claiming VAT

Retrospectively claiming VAT

Hi all,

Scenario:

A person has been trading for 6 months. They are now going to register themselves as a self-employed sole trader (as well as paying the

100GBP fine etc) and then register for VAT. Now, from what I understand (pls correct if wrong):

  1. They will have to pay income tax on all profits since the start of the business, as well as NI contributions as necessary.

  2. They can claim back VAT on purchases from when their business started (goods are sold outside of EU so no VAT charged on sales)

The thing I don't understand, is that for the second point, I have been told that they can only back claim VAT for stock that they CURRENTLY hold. Is this correct?

If true, depending on the level of profitability, this would be a "VAT penalty" of sorts (decrease in income tax - VAT included in costs - versus lost VAT claims on purchased and then subsequently sold stock)

Is that about right? Thanks Raj

Reply to
abd08
Loading thread data ...

They can only claim back VAT on stock held on the date of registration.

Why should anybody be able to claim back VAT when they are not even registered for VAT?

Reply to
PeterSaxton

Understood... my understanding of VAT is clearly poor! In that registration for VAT is not compulsory as a business (below a certain turnover), I made the erroneous assumption that VAT could be claimed regardless.

Thanks for the clarification.

Doh!!! =)

Reply to
abd08

Why don't they just register from an earlier date?

Reply to
PeterSaxton

Wow.... didn't know you could do that! Peter, you're a star!! =)

Thanks! Raj

Reply to
abd08

BeanSmart website is not affiliated with any of the manufacturers or service providers discussed here. All logos and trade names are the property of their respective owners.