Can I Claim VAT on Goods Bought Before Registration

Introduction

Businesses often incur costs before they become VAT registered, such as buying stock, equipment, or professional services. The good news is that HMRC allows you to reclaim VAT on some of these pre-registration expenses, as long as they relate directly to your business activities after registration.

However, there are clear rules on which purchases qualify, how far back you can go, and what evidence you need to keep.

When you can claim VAT on pre-registration purchases

You can reclaim VAT on certain goods and services you bought before your VAT registration date if:

The goods or services were purchased for your business.

The goods are still used in the business at the date of registration.

You hold valid VAT invoices for the purchases.

The key factor is that the expenses must directly relate to taxable business activity. HMRC distinguishes between goods and services, and each has its own time limits.

VAT on goods bought before registration

You can reclaim VAT on goods bought up to four years before your registration date, provided that:

The goods are still in your possession at registration.

You use them in your VAT-registered business.

They were not sold, consumed, or otherwise disposed of before registration.

Goods can include:

Stock or inventory held for sale.

Office furniture or equipment.

Tools and machinery.

Raw materials or parts.

You cannot reclaim VAT on goods that have been completely used up before registration, such as fuel or stationery.

Example

You registered for VAT on 1 July 2024. In June 2020, you purchased £5,000 of stock plus £1,000 VAT. If that stock is still held or used in your business when you register, you can reclaim the £1,000 input VAT on your first VAT return.

VAT on services bought before registration

You can reclaim VAT on services received up to six months before registration if the services relate to your business and were not used to make VAT-exempt supplies.

Services can include:

Accountancy or legal advice.

Website design or hosting.

Marketing or consultancy services.

Software subscriptions.

The six-month limit ensures the services are recent and still relevant to your VAT-registered activities.

You cannot reclaim VAT on services directly related to goods or assets that you no longer hold at registration, or on services that directly led to VAT-exempt sales.

Example

You hire a web designer in January 2024 to create your business website and register for VAT in July 2024. Because the service was provided within six months of registration and is used for your business, you can reclaim the VAT paid on the web design invoice.

Restrictions on pre-registration VAT claims

There are a few important restrictions:

Personal use: You cannot claim VAT on goods or services used partly or wholly for private purposes.

Exempt supplies: If you make VAT-exempt sales (such as financial or medical services), you cannot reclaim VAT on related purchases.

Depreciated assets: If goods bought before registration have been partially used, you can only reclaim VAT on the portion still used for business at registration.

Non-business use: Items purchased for non-commercial activities are excluded.

In addition, VAT on entertainment costs for clients or non-staff members cannot be reclaimed, even if incurred before registration.

How to reclaim pre-registration VAT

You claim VAT on pre-registration purchases in your first VAT return after registering. There is no separate form for this process.

When completing your return:

Include the total reclaimable VAT in Box 4 (input tax) of the return.

Ensure you keep valid VAT invoices or receipts for every item claimed.

Provide evidence that the goods are still on hand and used for business.

If you use accounting software, make sure your records clearly show which transactions occurred before registration and which after. HMRC may ask for supporting documentation during an inspection.

Record keeping requirements

HMRC requires you to keep:

Original VAT invoices and receipts.

Proof that the goods or services were bought for business use.

Records showing that the goods were still held at registration.

Calculations of any adjustments (for partial private use or depreciation).

Records must be kept for at least six years after the claim.

If you claim VAT on goods that are partly for personal use, you must adjust the claim to reflect only the business proportion.

Example

You bought a laptop in March 2022 for £1,200 plus £240 VAT and started using it 50 percent for personal use. When you register for VAT in July 2024, you can reclaim only 50 percent of the VAT (£120).

Common mistakes to avoid

Claiming VAT on goods or services used before registration that no longer benefit the business.

Failing to hold valid VAT invoices or receipts.

Reclaiming VAT on personal or mixed-use expenses.

Forgetting to include pre-registration VAT in the first VAT return.

Assuming that all pre-registration expenses qualify automatically.

Being accurate and keeping good records helps avoid HMRC challenges or penalties.

Example scenario

Sarah runs a small retail business and registers for VAT in August 2024. She purchased shop fittings and stock worth £10,000 plus £2,000 VAT in 2021, and design services worth £1,000 plus £200 VAT in May 2024.

The shop fittings and stock are still in use, so Sarah can reclaim the £2,000 VAT on them.

The web design was within six months of registration, so she can reclaim the £200 VAT on that service.

She adds £2,200 to Box 4 of her first VAT return and keeps all invoices as proof.

Tips for maximising your claim

Review all business purchases made up to four years before registration.

Separate business and personal expenses clearly.

Confirm you still hold any physical goods at the date of registration.

Check that suppliers charged VAT correctly.

Seek advice from your accountant if the items include mixed-use or capital assets.

Conclusion

You can reclaim VAT on goods bought up to four years before VAT registration and on services received up to six months before, provided they are used for your VAT-registered business. Keep all invoices, record how the goods are used, and include the claim in your first VAT return.

Planning your VAT registration carefully and maintaining accurate records ensures you recover as much eligible VAT as possible while staying compliant with HMRC’s rules. For complex claims or large purchases, consider consulting a qualified accountant or VAT specialist.