When you register your business for VAT, you can reclaim the VAT you paid on stock or assets acquired in the four years before the date of registration, if you still hold those assets on the registration day. You can also reclaim VAT incurred on services purchased for business purposes within six months before registration.
Suppose that you bought a new van for £24,000 (including £4,000 VAT) to use in your business on 1 December 2013. You register your business for VAT on 1 March 2017 and still own the van at that date. You can reclaim the full £4,000 of VAT you paid when you bought the van, although by March 2017 the van is over three years old.
HMRC had been arguing that the VAT reclaimed on assets such as your van should be reduced to reflect the reduction in the asset’s value between its purchase and the VAT registration day. This has been shown to be the wrong approach: all the VAT can be reclaimed.
If you reclaimed only a proportion of the VAT incurred on the purchase of assets acquired before becoming VAT-registered, you can amend your claim to recover the full amount, if less than four years have passed since your initial claim. It’s worth checking your old receipts to see if there is additional VAT you can reclaim.