V3.431 Goods and services relating to a pre-registration period

Part V3 Supplies, acquisitions and imports

V3.431 Goods and services relating to a pre-registration period

Tax treated as input tax

V3.431 Goods and services relating to a pre-registration period


It has been held1 that the purpose of the deduction system is to relieve the trader of the burden of VAT paid or payable in the course of all his economic activities. Economic activities consist of several consecutive transactions. An economic activity may be carried on before supplies are made and thus input tax credit may be available even if the intended activity never materialises, or is terminated before completion2.

Regulations3 made under VATA 1994 s 24(6)(b) provide that HMRC may authorise a taxable person to treat as input tax VAT incurred on certain goods and services obtained before his effective date of registration. HMRC consider that this relief extends to tax incurred by a person prior to its inclusion in a VAT group4. However, a comparatively recent addition to Guidance Manual VIT32000 stated “You must also take into account any use that has been made of the goods or services prior to registration. For example: A business that is trading below the registration threshold acquires a van; after three years the business registers for VAT. The van is still on hand at the ED [Effective Date of Registration]. The van has been used to make supplies that were not subject to VAT. The amount of VAT that can be recovered under regulation 111 should reflect the use of the van for making supplies before registration.” Although this change was not publicised to any degree,

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