How to make sure your start-up is VAT efficient.

Xero accounting makes work easier
Written by Alan Davidson
Alan Davidson is a Chartered Accountant, director and founder of Pentins Business Advisers, entrepreneur and author of the Amazon best-seller "Achieve Your Business Vision". With over 25 years of helping businesses succeed, Alan knows how to build a business with real value, while avoiding costly mistakes.
March 22, 2019
You’ve set up a company to run a new business venture. It’s risky and may come to nothing. In the meantime the company is incurring significant costs. Can you recover the VAT, and if so when? Keep on reading to find out how to make sure your start-up is VAT efficient.

Start-up costs

The set-up period and associated costs will vary depending on the type of business you’re starting. These costs are painful while there’s no income being generated. One way to reduce the start-up expenses is to recover the VAT you paid on them. You’ll need to be VAT registered for this.

VAT registration

The good news is that you’re entitled to register even before you’re ready to start selling goods or services. As long as there is economic activity, such as purchasing goods or services for future trading, you are “in business” which means you can register voluntarily. HMRC calls this an intending trader registration. Once registered as an intending trader you must submit returns in the same way as active businesses. This allows you to claim a refund of VAT paid on set-up purchases.

Proving your right to reclaim

Although spending money on business preparation costs gives you the right to register, the general rules only allow you to reclaim VAT on purchases if they’ll be used to make VATable supplies. Being registered alone isn’t enough to allow you to reclaim VAT.

HMRC will make a big deal of asking for evidence to show you have a genuine intention to make taxable supplies before it will register you.

How long do you have?

In theory, there’s no time limit on how long you can remain registered as an intending trader. The longest period we know of was over three years, but that was an unusual case where the trader needed to obtain government licences before it could start making sales. That case highlights the importance of registering as an intending trader as soon as you can even if the business is speculative. The company in question would have missed out on VAT claims running into tens of thousands of pounds had it left its application until it was sure it was going to be able to trade.


A company can’t be VAT registered before the date of incorporation. However, it’s usually possible for those who will be directors to personally register as intending traders before incorporation.

Want to know our Pro Tips for VAT Registration? Download our PDF here.


Are you a UK business owner? Would you like to ACHIEVE more for your business whilst saving thousands on tax? To find out how Pentins can help you and your business, talk to one of our expert advisers. Book a Discovery Call.

Sign Up to Our Newsletter

Sign up for our newsletter

Stay in the loop with all the latest business news, government announcements and expert advice from our team

You have Successfully Subscribed!