VAT Problem

A

AJS

Guest
Hi,
Basically I'm after setting up a business to provide sound equipment rental however i have a small issue regarding the VAT on my business expenditure required to do business such as speakers microphones etc.

Now, I initially began setting up my business in march but due to one thing and another i didn't actually get a vat number live until the 1/11/2008. And am only beginning to trade now.

The unfortunate thing is i had purchased equipment earlier that year(march) from a good friend of mine who had a very good system come in which is offered me for a very good price, I purchased this and paid VAT on it.

Now i'd like to reclaim the vat i paid on it however my vat number is only live from november.

I paid for the equipment via a long term loan from my parents which i have to pay back at some stage.

Please advice on what i should do re my vat reclaim.

Thanks
 
You could return the system to your friend. He would refund your money. You buy a new system from him and he issues invoice.
 
I think this is a non runner to be honest, As I'm very happy with the system that i have already.

Is there not some procedure you can go through to reclaim expenses incurred up until the business is fully established
 
Hi AJ
I didnt want to put " " around new, but will do so now. He sells you a "new" system.

You said it was the VAT you were trying to reclaim
 
I totally get what you on about here but...I don't think he's gonna do that cos his accountant will prob go mad and it's technically wrong.

Say for instance i put all of this in on my return from 1/11/08 to 31/12/08 even though it's technically not liabilities from this time period what will happen - will i get a nice letter saying i can't do this or will it pass through?

Regards,
Alan
 
Alan,
there is a facility for doing yearly vat returns,I do it, so you could be 'technically' kosher if you did opt for yearly filing.

Also you should have a look at revenue.ie because I think I recall I had a similar situation before starting up a business years ago and all of my pre-registration,pre-incorporation invoices were definitely included in my first return.

If you have an inspection the worst thing that can happen is that they will disallow it.

You are clearly trying to do the right thing and revenue are not that bad,particularly in relation to an honest mistake(if that is what it turns out to be)
 
You could also treat it as Capital introduced in the form of a fixed asset. The business basically buys from the private individual and hence the business then owns that asset. At a later stage when you have cash surplus you can withdraw the money without there being any tax implications.
 
Hi Again,
It seems as though I'm totally screwed regarding this...And the only reason i decided to do register for VAT is because i got a good deal on a pa system that i bought, I could reclaim the vat on it when i decided i was ready to start up business. And the VAT isn't a small amount either it's in the thousands.

This article says i'm not entitled too.

http://www.revenue.ie/en/tax/vat/refunds/index.html#_Preregistration
 
It looks like you have 2 choices:

Sell it back to original owner and rebuy it now!

or

Use it as Capital Introduced and when your business has cash surplus, withdraw that amount and not be liable to Income Tax on it.
 
Pre-trading expenditure and VAT

October 2nd, 2008 | Tax tips
Often people incur business start up costs (and VAT) before they get round to setting up their limited company and registering for VAT. So, how far back can you go in reclaiming this type of VAT?
A VAT registered company can recover VAT incurred before registration on its first VAT return as long as:
  • the person who paid for the item becomes a shareholder, employee or director of the company
  • the company reimbursed the individual for the whole cost
  • the goods or services in question were acquired for the business
  • if goods, they must have been purchased within 3 years of the start of registration and still be owned, e.g. computers. Items that are consumed (petrol, electricity, gas) do not count.
  • if services, they must have been purchased within 6 months of the start of registration
 

Unfortunately that's all for a company and i'm regg'd as a sole trader as i don't need to be doing mountains of paper work.

Plus it seems to be off a uk website also.
 
It is same here really, does not matter that you are self employed. Just put in receipt for equipment and you will get the vat back on it.
 
Businesses can take a while to set up and I was advised when I was setting up (pre vat) to save every legitimate expense docket as it is claimable as it is recognised that it does take time and money to start a business. i did a Start Your Own Busines course a few years back and this was (also) taught in the course...along with little pointers like bringing your biz cards and banners to restaurants so that you might claim it as a business expense!! ...it was a FAS course....straight from the horses mouth!
 
Last edited:
Nice One, Sure i'll give it a go anyways - I'll put it all in on my november december return and hope for the best - it should all work out fine...Fingers Crossed.

Thanks Again
 
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