Retrospectively claiming VAT

May 01, 2008 4 Replies

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


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?

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!!! =)

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

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

Thanks! Raj

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