Recovery of VAT paid before registration (for retail business)

Question asked by Adrian Bhagat 8 years ago

My food retail business has been running since November 2015 and became VAT registered on 1st March this year; so, I am trying to do my first VAT return.

The VAT report from ClearBooks for the last 3 months is fine. The problem I have is with claiming VAT on stock purchased before my VAT start date.

From VAT Notice 700, 11.2:

You can treat the VAT on goods that you obtained or imported before you were registered as if it were input tax. If: ... you compile a stock account of the goods - this must show the quantities of goods and the dates when you obtained them, and if you used any goods to make other goods, or disposed of them after you were registered for VAT, the account must give details, with dates

So, from this I think I need to compile a list of all VATable stock, compile all the dates when each item was purchased, work out how many were sold before the VAT start date and work out how much VAT was paid on them. However, I also need to record what happened to them after the VAT start date to ensure that I can show they have been sold/disposed of or are still in my possession.

The problems I have are: (1) My POS software doesn't record this information in enough detail (2) I have around 800 VAT-able product lines and have sold 100s of units of some of these lines. (3) I have no record of stock that went out of date and was disposed of without recording a sale.

If I was really going to generate a report as specified, the only way I could see to do this would be to go through all my purchases since opening (200+ invoices); note the purchase details for all of the VATable stock; find all sales before the VAT start date to give me a stock total. Then, go through all purchases and sales since the VAT start date to show where stock ended up.

Is this really what is expected for a retail business to claim back input VAT on stock held at the VAT start date? I could generate a report showing all stock held at the VAT start date and the input VAT paid, but that doesn't seem to be enough to satisfy the conditions in 11.2

I'm tearing my hair out trying to work out how to generate the required info. There's £1000s that I could be claiming back but the amount of work seems to be immense.

Thank you very much in advance for your help.

1 Reply

Hi Adrian,

I would advise getting in contact with your accountant to work out the calculations. However, to add this in Clear Books, you will need to create a journal for the amount that can be claimed back by crediting an expense account and debit 'VAT control' account (again, please double check with your accountant). Please see the link below for an example (please make note of the 'include in VAT return' checkboxes: https://s3-eu-west-1.amazonaws.com/uploads-eu.hipchat.com/36185/273538/9YfneunwaaSCKdN/upload.png

Thanks, Tommy

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