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Steve Allen of VAT Advisers Ltd explains how to reclaim VAT following de-registration in certain circumstances.

Introduction

There can be many reasons why a business de-registers e.g., sale of the business, retirement, insolvency, making a company dormant, ceasing to make taxable supplies, or falling below the VAT de-registration limit. Once you have de-registered for VAT, most people think that you can no longer reclaim any VAT. However, there are circumstances in which you can still get some VAT back from HMRC.

Reclaim Form

You may use Form VAT 427 (VAT 426 if your business is insolvent) to claim input tax on goods or services supplied to you for business purposes while you were registered, that you didn't claim either on your normal returns or on your final return. For example, it may be that you hadn't received the necessary evidence (e.g., a VAT invoice) to make the claim by the time your final VAT return was due. Subject to the 3-year limit (4-year limit from 1 April 2010) for reclaiming VAT, you will still be able to claim a repayment of VAT, using Form VAT 427, once you receive the invoices. The VAT 426/427 can be obtained from the National Advice Service or downloaded from HMRC’s website (www.hmrc.gov.uk).

More Input VAT Can be Reclaimed

You can also use Form VAT 427 to make a claim for input tax where you made an error while registered, and didn't make a claim at the right time despite holding the proper evidence. You must provide invoices confirming that the goods or services were purchased before de-registration. You should make the claim, which is also subject to the 3-year limit (again 4-year from 1 April 2010), as soon as possible after cancelling your registration. However, bear in mind that any payment due to you could be delayed if your business bank account has been closed.

In addition, you can also claim the VAT back on services that you receive after de-registration, provided they relate to your business activities while you were VAT registered. For example, your business de-registers on 1 March 2009 because turnover has fallen below the de-registration threshold, and you send its final VAT return in by 31 May 2009. Your accounting year finished 28 February, and your accountant completed your accounts and sent you the bill in September 2009. You can still claim the VAT back on that bill because it relates to the time when you were registered for VAT. These claims are also subject to the 3-year cap (4-year limit from 1 April 2010), starting from the date of the invoice that is sent to you.

Partial Exemption

If your business is partly exempt, the normal ‘de minimis limits’ do not apply, and any VAT relating to an exempt supply cannot be reclaimed. With regard to non-attributable input VAT, the recoverable proportion applicable immediately prior to de-registration should be used.

VAT Groups

If your business is registered as a VAT group, and a member leaves the group registration and does not register in its own right, the representative member may recover VAT incurred by the departed company after the date it leaves.

Transfer of a Going Concern

Where a business is transferred as a going concern (‘TOGC’) and the VAT registration number is to be retained by the purchaser of the business by a VAT68 application, the transferor is entitled to submit a claim for de-registration expenses. The claim is to be submitted in the usual manner on Form VAT 427.

Documentary Evidence and Contact Details

HMRC will need original documentation (i.e., invoices, supporting evidence etc.) to be sent with the VAT 427 claim form.

There is a centralised team in Liverpool where all completed forms and original documentation should be submitted:

VAT 427 Team
ETBD 3SE
Queens Dock
Liverpool
L74 4AA

Once HMRC has agreed your claim, the original invoices will be stamped and returned to you.