VAT: Brief 16 (2016) - treatment of VAT incurred on assets used prior to VAT registration

VAT: Brief 16 (2016) - treatment of VAT incurred

HMRC have issued Business Brief 16/16 clarifying its position on pre-registration input tax.


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HMRC have issued a Brief clarifying their position on pre-registration input tax. Back in 2014, stories emerged of HMRC restricting input tax on certain assets on the basis of depreciation. This led to complaints of a change in policy. The current Brief refers to inconsistency with regards the word ‘consumed’.

In this Brief HMRC have confirmed the following policy on VAT recovery, subject to the normal rules:

  • VAT on services received within six months of the effective date of registration (EDR) and used in the business at EDR is recoverable in full;
  • VAT on stock is deductible to the extent that the goods are still on hand at EDR (for example apportionment may be required); and
  • VAT on fixed assets purchased within four years of EDR is recoverable in full, providing the assets are still in use by the business at EDR.


For further information please contact :

Karen Killington

Steve Powell



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