Business startup VAT refund?

golddustmedia

Sorry for what’s a really basic question but I’m trying to understand about VAT reclaiming when my startup costs for a new business are higher than my income.

basic summary, I’ve registered a limited company to start work as an electrician. I want to buy a used van which has a cost of about £22k, plus I have other startup costs for tools and materials. Obviously I’ll be paying VAT on everything I buy which I think will be in the region of £8k in VAT paid out.
However while I’m starting out and have few customers I’m expecting the volume of work (and therefore the VAT I charge) to be lower than my outgoings. So I’ll have paid out more VAT than I collect.
Am I allowed to claim back a VAT refund if the company makes a loss in the first year and collects less VAT than it pays out?

Jeremy535897

Is the company registered for VAT? Do you have the appropriate software to file VAT returns under MTD? Do you have an accountant? See https://www.gov.uk/vat-registration

The company must complete VAT returns quarterly, not yearly, unless you use the annual accounting scheme (unusual).

If a VAT return shows more VAT input tax than VAT output tax, the company will receive a refund.

If the company purchases business assets like a van before becoming VAT registered, the VAT can normally be claimed on the first VAT return. See https://www.gov.uk/vat-registration/purchases-made-before-registration

nick74

Think carefully before voluntarily registering for VAT. Are your customers likely to be private individuals rather than (VAT registered) businesses? If so, then voluntarily registering for VAT effectively makes your prices 20% higher than a non-VAT registered competitor.

Although it may seem like a no-brainer to register voluntarily and reclaim £8k, bear in mind that for example if you turnover £40k ex VAT in your first year you will simply be paying all of that £8k back to HMRC in output tax!

Pennywise

nick74 said:

Think carefully before voluntarily registering for VAT. Are your customers likely to be private individuals rather than (VAT registered) businesses? If so, then voluntarily registering for VAT effectively makes your prices 20% higher than a non-VAT registered competitor.

Although it may seem like a no-brainer to register voluntarily and reclaim £8k, bear in mind that for example if you turnover £40k ex VAT in your first year you will simply be paying all of that £8k back to HMRC in output tax!

All of that.  AND, you can still reclaim the input vat on your equipment and goods in hand as at the date you register, so you could still claim the VAT on the van if you registered after, say, a year, which is best of both Worlds.