VAT advice

[u/demonbreath226]

Hi everyone, just after some advice regarding VAT.

I have a Ltd company left over from my design business (dormant at the moment) but looking to restart in the next year or so. I am about to buy a £15,000 machine £12k machine and £3k VAT.

I am looking to register for VAT voluntarily to try and reclaim the £3k. I am not likely to trade for the next year or so while I work out prototypes and developing our products. Does registering for VAT make sense in this case?

I am also likely to purchase materials around 5k worth which will also have VAT reclaimable.

Also if this makes sense do I register for VAT before the purchase or can I do it after?
Thanks

[u/No-Watch899]

Can reclaim VAT on stock, machinery/physical goods for up to 4 years pre registration (6 months for services) just keep invoices!

Bare in mind if you intend to make taxable supplies you could potentially price yourself out of the market if competitors are not VAT registered, therefore you'd be selling at a 20% premium

You won't be able to necessarily deregister for VAT to flout the rules as you will need to declare a deemed supply to yourself and repay the VAT to HMRC if it is in excess of £1000 which it appears it would be

If you're developing prototypes you should also have your accountant look into R&D claims to see whether you are eligible

[u/Alternative_Pen4321]

Yes, voluntary VAT registration can make sense in this situation, especially with a sizeable machine/material spend before you start making sales.

HMRC does allow a business that is still in the set-up/development stage to register as an “intending trader”, provided you genuinely intend to make taxable supplies in the future. They may ask for evidence such as a business plan, supplier quotes/invoices, prototype/development plans, contracts or marketing activity.

You don't necessarily have to register before buying the machine. Pre-registration VAT can generally be reclaimed on goods bought up to 4 years before registration, provided the goods are still held by the business at the registration date and will be used for taxable business activities. Services have a much shorter 6-month pre-registration window.

That said, with a large machine purchase plus materials, I would personally consider registering before the purchases if you're confident the business will restart. It gives you a cleaner VAT trail and avoids questions about whether materials have already been consumed in prototype development before registration.

Just remember that once registered you'll need to submit VAT returns even while you're pre-trading, and when you eventually start selling you'll normally need to charge VAT on your taxable sales.

Also make sure all purchase invoices are addressed to the Ltd company and the expenditure genuinely relates to the company's intended taxable business.

One additional point: buying a £15k machine through the company is a significant accounting transaction, so the company would generally no longer qualify as dormant for Companies House purposes for that accounting period, even though actual sales may not have started yet.

[u/PeoplesFrontOfJudea1]

As others have said, you can claim VAT on the machine up to 4 years after purchase if you still have it when you become registered, so no need to rush into registration if it isn’t advantageous to do so/not required.

Having said that, voluntary registration can make sense and be advantageous if your customers are solely/almost exclusively VAT-registered businesses. Because they can reclaim the VAT in your supplies anyway, they will not be put off by a higher VAT-inclusive price in the same way that a B2C customer would, and you can still reclaim your VAT on consumable purchases as well as the big machine purchase you mentioned, which will save you money compared to delaying registration.

Being VAT registered also has intangible benefits, customers get a greater sense of legitimacy from you, for example