Vat Deregistration – Stock in Hand

[THS1110]

Hello,

After 5 phone calls to HMRC all with differing answers I want to cry.

We registered for VAT on July 1st after a large contract coming in that would put us over the threshold. We purchased a new printer for £10k on July 16th. Just after the contract fell through due to COVID, and we would be knowhere near the threshold so deregistered for 1st August. Not knowing it would get us in a right pickle. 

so, we are having to do a manual vat return as sage won’t let us submit are now Deregistered. When talking to HMRC someone mentioned that we would not be able to claim the vat back on the printer as it is an asset. And in fact told us not to even put it on the form?! Surely this can’t be correct?

i have just rang again and been told that as we purchased the printer whilst we were registered, we can claim for it.

we are a fairly new company on three waiting lists for accountants in the area so feel at a bit of a loss right now. I would be so grateful for some help on this. 

manual return is being ‘sent out’ by the digital team. 

[VAT-adviser]

Hi,

You should be able to reclaim VAT on anything you bought for “business” while still VAT registered as that is written in statute. The capital goods scheme – whereby VAT on assets claimed is adjusted over 5 years or 10 years but only applies to individual items costing at least £50,000 (excluding VAT) and anything else is reclaimed in the usual way, hence the first HMRC officer is wrong.

However in as much as you want to claim input VAT, when you deregister you are treated as if you have sold all the stocks in hand and hence output VAT is chargeable of the deemed sales price. Whilst you can claim the £2k input VAT, you should also account for any stock and other assets you have on this date if (1) you had claimed input VAT when you bought them (2) the total VAT due on these assets is over £1,000.

So in your case, i would think the net benefit is nil.

If there were no such rules, businesses would register for VAT and claim input VAT on major purchases and deregister immediately.

Hope this helps.

[Author]

Posts