HMRC explains tax calculations for businesses assets prior to VAT registration
The HMRC in the UK has issued a circular, detailing the policy on the deduction of VAT relating to assets used by a business prior to its VAT registration, stating that this has not always been managed with the correct consistency.
The circular also clarifies tax rulings, for instance when, and the scope of what VAT is deductible, including what to do if the correct procedures have not been followed previously.
A company registering for VAT can claim back tax that they have incurred on goods and services before their EDR (effective date of registration) as long as they have been used appropriately by the taxable individual in order to make taxable supplies after registration. The HMRC must amend the guidance regarding the VAT tax manual and Section 10 of the VAT notice to ensure the new policy amendments are clear.
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