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UK VAT deduction rules when incurred before VAT registration

HMRC has recently published a brief where it is explained how to deduct VAT incurred before the Effective Date of Registration (EDR). This because EDR hasn’t always been treated consistently.

Subject to the normal rules on VAT deduction, the following rules apply:

  • VAT on services received within 6 months of EDR and used in the business at EDR is recoverable in full
  • VAT on stock is deductible to the extent that the goods are still on hand at EDR (for example apportionment may be required)
  • VAT on fixed assets purchased within 4 years of EDR is recoverable in full, providing the assets are still in use by the business at EDR

Of course full recovery only applies if the business is fully-taxable. In case of a partial exemption or non-business activities, or need to restrict VAT deduction for any other reason, you’ll need to take that into account when calculating the deductible VAT.

Polish option for quarterly VAT filings for large tax payers might be abolished

Businesses with a VAT registration in Poland can opt for a quarterly VAT Return submission. For large tax payers, monthly prepayments are required of 1/3 of the VAT liability in the previous quarter. It is now proposed to abolish this option for the large tax payers (= turnover exceeding PLN 5 million per year) meaning that quarterly Returns are no longer possible. The proposed implementation date is 1 January 2017.

Source: gov.uk

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