Reclaiming VAT on pre-registration purchases: What start-ups need to know

If you’ve recently registered for VAT, you might be sitting on a hidden pot of reclaimable tax. Many businesses don’t realise they can claim back VAT on purchases made before registration - but only if they meet specific criteria. Here’s how to make the most of it.

1. You don’t have to register immediately. But you might still pay VAT

In the UK, you must register for VAT once your taxable turnover exceeds £90,000 in a 12-month period, or if you expect to exceed that threshold within the next 30 days. But even before registering, you’re likely paying VAT on goods and services used to set up or run your business.

The good news? HMRC allows you to reclaim VAT on qualifying purchases made before registration, if you follow the rules.

2. Time limits: 4 years for goods, 6 months for services

HMRC sets strict time limits for reclaiming VAT:

• Goods: You can reclaim VAT on goods purchased up to 4 years before registration, provided they’re still in use, owned, or in stock. This includes raw materials used to produce goods you still hold.

• Services: You can reclaim VAT on services purchased up to 6 months before registration, as long as they relate directly to your business.

This means that if you bought a laptop two years ago and still use it for work, you can claim the VAT. But if you paid for a branding workshop 8 months ago, that’s outside the window.

3. What qualifies for reclaim?

To reclaim VAT on pre-registration purchases, they must meet three key criteria:

• Business use: The purchase must relate directly to your business activities.

• Still in use or stock: For goods, they must still be owned or used in your business.

• Proper documentation: You’ll need valid VAT invoices or receipts to support your claim.

Examples include:

• Equipment like computers, printers, or tools still used in your business.

• Raw materials used to produce goods still held in stock.

• Professional services like accounting, legal advice, or marketing support, if used within the last 6 months.

  
  

4. How to reclaim VAT

You’ll include these claims in your first VAT return after registration. Make sure you:

• Keep all receipts and invoices.

• Clearly separate pre-registration purchases from current ones.

• Provide supporting documentation if HMRC requests it.

  
  

If you’re using accounting software like Xero, you can tag these purchases and attach receipts directly to transactions, making your VAT return smoother.

At BlueFox Accounting, we help start-ups and small businesses reclaim VAT with confidence. Whether you’re registering for the first time or reviewing historic purchases, we’ll guide you through the process and make sure nothing is left on the table.