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Choosing the Correct Date of Registration

An interesting case that I have dealt with this week considered the date of registration for a partnership that had refurbished a property and was intending to make VATable supplies of that property.

The partnership had incurred VAT on invoices from builders, plumbers, electricians and many other traders over two years in refurbishing a holiday home that would be let to third parties. The accountant contacted us on our helpline to check what forms he should complete for the application and whether the VAT on costs incurred to date could be recovered as pre-registration input VAT under the 4-year rule.

On discussion it became apparent that the accountant had not appreciated that the costs incurred from the contractors were services and the six month pre-registration rule would apply. This meant that if he chose the current date as the date of registration this would mean a significant amount of VAT on costs that the partnership incurred would be lost.

We advised the accountant to backdate the VAT registration and by doing so secured VAT recovery. If the accountant had continued down the path that he was intending it would have been extremely difficult (and potentially impossible) to rectify the issue.

This case is not in isolation and throughout the year we receive similar queries. We recommend that if your client is incurring VATable costs and is considering VAT registration at some point in the future that you carefully consider the date you are advising them to be registered with effect from.

If you have any questions, please do not hesitate to speak with one of our consultants on our free helpline.

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