EU Purchases Prior to VAT Registration

Q. My client is setting up a new café business and wants to buy some kitchen equipment from Italy.  As she hasn’t VAT registered yet she has been told by the supplier that she will be charged Italian VAT.  Is this correct, and if so can she claim it back?

A. The supply of goods from one member state to another can only be zero-rated where the customer provides the supplier with their VAT registration number and the supplier holds the evidence of removal. As your client is not VAT registered this will be a distance sale from Italy, meaning that unless the supplier is VAT registered in the UK it will have to charge her Italian VAT.

Unfortunately, there is no provision for recovery of pre- registration input tax incurred in other member states.  Your client could VAT register prior to making the purchase so that she would account for acquisition tax which would contra itself out. However, she should weigh up the immediate benefit of not suffering VAT on the purchase with the long-term effect of then having to account for output tax on her sales which otherwise could be VAT free until her turnover exceeds the threshold (currently £85000 pa).

If your client were to buy her equipment from a supplier in the UK then she would be able to take advantage of the usual time limits for recovery of pre-registration input tax.  This would allow recovery of VAT incurred in the four years prior to the effective date of registration (EDR) on stock and assets still on hand at the EDR, and six months prior to EDR in the case of VAT incurred on services.

If you have a VAT query why not contact the VAT Advice Line on 0844 892 2470 to discuss the implications. Our team of experts have a wealth of experience and can also provide a written consultancy service at £180 per hour plus VAT.


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Senior VAT Consultant

Viv has worked in VAT since 1989, when she joined HMRC as an Assurance Officer. Before joining the team as a consultant in 2000, she had spent five years dealing with written and telephone enquiries at a local VAT office.

In 2007/ 2008, she spent a year with a major accountancy firm gaining experience of VAT from a different perspective and developing skills which are relevant to her current role.