Many businesses are not aware that it is possible to reclaim VAT on goods and services received before the business was VAT registered.

The rules are different for both goods and services but these are as follows:

You can reclaim VAT on goods you bought or imported no more than four years before you were registered for VAT if all the following applies:

• the goods were bought by you as the entity that is now registered for VAT (for example, the individual, business or organisation)
• the goods are for your VAT taxable business purposes, which means they must relate to VAT taxable goods or services that you supply
• the goods are still held by you or they have been used to make other goods you still hold

You can’t reclaim VAT on any of these goods:

• goods that you’ve completely used up before you registered for VAT (such as petrol, electricity or gas)
• goods that you have already sold or supplied before being registered, or have used to make goods you have sold or supplied before being registered
• goods that relate to supplies you make that are exempt from VAT

The word ‘goods’ means goods that are intended for resale, and also goods that you keep as assets, such as computer systems, shop fittings, office equipment and furniture, tills, vans and other equipment. It also covers anything else you’ve bought that isn’t a service, so it includes consumables such as stationery.

To reclaim VAT on goods bought before you registered for VAT, you will need to carry out a careful stock check and record the quantities of goods and the dates when you obtained them. This will form the basis of the records you need to keep to validate your claim.

You will also need to check that you still have evidence that you paid VAT on those goods. You need VAT invoices from suppliers in the UK or the EU, and import VAT certificates (form C79) for imports from outside the EU.

You can reclaim VAT on services you bought during the six months before you registered for VAT if both the following apply:

• the services were bought by you as the entity (for example, the individual, business or organisation) that is now registered for VAT
• the services are for your VAT taxable business purposes, which means they must relate to VAT taxable goods or services that you supply

You cannot reclaim VAT on any of these services:

• services that relate to goods you disposed of before you were registered for VAT – for example, repairs to a machine you sold before you were registered
• services that relate to goods or services you supply that are exempt from VAT

Examples of services you might have paid for when starting your business are legal and accountancy fees, services relating to setting up your computer and other equipment, and fees and services relating to your premises. You can reclaim the VAT on these and other services assuming all the conditions listed here are met.

To reclaim VAT on services bought before you registered for VAT, you will first have to compile an account of these services. This must describe the services and the dates when you received them. You will also need to have the evidence that you have paid the VAT on those services.

Read my blog for more information on VAT registration and when you need to register.