Last month I exceeded the VAT threshold for the first time and I was planning on registering for VAT today. My understanding is that a 4 year rule applies to reclaim VAT on purchases made prior to the effective date of registration. How will I go about this for goods I have imported from the EU where VAT has already been paid at source and at the local rate?
Having signed in to my Government Gateway page in order to register I was asked a set of online questions from HMRC. The final question was as follows:
“Have you or are you planning to claim refunds under the 8th or 13th directive? 8th directive refunds allow EU businesses to claim VAT refunds incurred in another EU member state.”
Is this relevant to my question about reclaiming VAT from EU purchases prior to registration? Online information sources on the 8th directive are either to technical for me to comprehend or are overly vague.
Well I spoke to someone at the HMRC VAT helpline. It transpires that VAT cannot be claimed back from EU imports purchased prior to VAT registration. I am currently holding thousands of pounds of imported stock and I trade in a competitive marketplace where my margins are pretty low. There is going to be no way I can increase prices post-registration to a profitable level so this really is a disaster for my business.