Claiming VAT on assets when re-registering for VAT

VAT Question

A sole proprietor client was previously registered for VAT but deregistered as his turnover dropped below the deregistration threshold. Although the client held some assets when he deregistered, he did not have to declare VAT on these as the stocks and assets he held at that time of deregistration were valued at below £5000.

The same sole proprietor’s turnover has now increased to a point where he is having to register again for VAT and is adamant that he can claim VAT on both goods he has purchased while deregistered but still holds when he re-registers for VAT but also the assets that he had purchased when he was previously registered and still holds.

VAT Answer

Your client is correct in regard to purchases made while he was deregistered but not in regard to the assets he purchased while previously registered.

The general rules ion Regulation 111 of the VAT Regs 1995, which govern the right to recover VAT incurred on goods purchased prior to registration and held at registration, do not differentiate between a first-time registration or a re-registration of a previously registered entity; both are a new registration.

Therefore, in the client’s case, where VAT has been incurred goods purchased during the time he was deregistered and still held at the time of re-registration, he is entitled to recover this VAT.

However, under the heading ‘Post Registration’ within their online manual VIT32000 HMRC confirm that Regulation 111 can only be used to recover VAT on assets that were purchased while previously registered for VAT if, at the previous deregistration, the business declared VAT on the value of those assets and it is that VAT that the business would be able to recover, apportioned if they only hold some of those assets at the time of the re-registration.

Related VAT Questions

VAT on Baby Clothes

My client, who sells baby gifts and accessories, has just registered for VAT. Are these zero-rated supplies like children’s clothing? Items sold include baby sized towels, muslin cloths, blankets

Payroll for UK employees going to work overseas and offshore remote workers

We are frequently asked to advise on the Income Tax and National Insurance treatment of UK employees who are being sent to work overseas, and employees who will work remotely from an offshore locat

Supply and Installation of Window Blinds

My client supplies blinds for windows and back in 2021, supplied and installed some blinds to houses at a new housing development before the houses were complete.

What if the Supplier has Charged UK VAT

Do I need to reverse charge VAT for any supply of services ((i.e., software from Apple, Microsoft, Adobe etc…) with no valid vat receipt (no GB vat number). Is any supply of services (i.e.

Are ‘as new’ goods classed as “second-hand goods” for the Second-Hand Margin Scheme?

My client buys high end, high value footwear, mainly trainers, from private sellers so does not incur VAT when he buys the footwear. However, he will only buy the footwear if they are still boxed a

FRS and transferring your VAT number

My client is a VAT registered sole proprietor who has been operating under the Flat Rate Scheme (FRS). His turnover is now around £200,000, and he has formed a new Ltd Co and transferred his busin

Vantage Fee Protect Customer Testimonials

Having changed over to Vantage a couple of years ago we have been very satisfied with the service. Especially the claims handling and technical advice lines for both our firm and insured clients on employment and business legal matters. The webshop Vantage offer allows our clients to join and pay electronically. This positively impacts our bottom line and makes things simple and efficient for our clients.

Linda Giles Chartered Accountant

Real people, real results

Vantage Fee Protect provide market leading Tax Fee Protection
Insurance schemes through accountants.

Don’t be shy,
get in touch

Vantage Fee Protect provide market leading Tax Fee Protection
Insurance schemes through accountants.

"*" indicates required fields

This field is for validation purposes and should be left unchanged.