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VAT for sole trader start-ups

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How to maximise your VAT reclaim

As any new business knows, you can incur significant costs at the outset before you get any income.  Most of these start-up costs will have VAT included and if you plan properly you should be able to recover this VAT as long as you are planning to make taxable supplies.

Save pounds on VAT

Plan ahead and reclaim everything

If you are setting up a business and can ahead, you can register for VAT from the date your business will start.  For most traders there is not any restriction on the date the business can start, but for some professional services eg barristers and advocates, no trade exists until they qualify.  To maximise the VAT to be reclaimed, the sole trader can register for VAT in advance of date of commencement, effective the date they are due to qualify.  This means that the VAT registration will be in place from the 1st day of trading and all sales invoices can be issued as VAT invoices.

Pre-registration VAT

There are specific rules allowing pre-registration VAT to be reclaimed, but any claims to recover pre-registration VAT must relate to the same trade and made by the same person.  A sole trader who incorporates the business is not the same legal person as the new company.  Any VAT suffered by the (unregistered) sole trader can’t be claimed as pre-registration VAT by the new company.

Get help with registering

Your accountant will be able to register you for VAT and recommend the best scheme for you.  It can take a few weeks for HMRC to process applications, but accountants who are registered as agents with HMRC are likely to have a quicker turnaround time.  For advice on registering for VAT and setting up your invoices, please visit the Alterledger website.


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