I have a cafe which is currently closed having an extensive refurb. I am wondering whether to become VAT registered so I can claim back the VAT I am having to pay the tradesman. Before the refurb I was only open at the weekends but when I reopen I will be open during the week so may have to be VAT registered. Is it better to do it now?
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A Uk business with a business establishment in the UK can register for VAT as long as you are making taxable supplies. From your effective date of registration you can recover VAT as long as the input tax you have incurred relates to a taxable supply, been purchased for the furtherance of the business and you have a vat invoice. If you decide to register you can backdate the date you become registered up to 4 years allowing you to recover vat previously incurred as long as normal input tax rules are met but would have to pay HMRC output tax on all sales liable to VAT from the date you decide to backdate it to.
We cannot advise if it would be best to register now or once you hit the threshold of £85 000 within any 12 month rolling period as this is a business decision but you should consider the amount of input tax you would recover against the amount of output tax you would be due to pay to HMRC if you register for vat early.
If the value of the refurbishment exceeds £250 000 then you should read public notice 706/2 capital goods scheme. This would only be relevant if in the next 10 years you start to use that building to make exempt supplies, if you continue for the next 10 years making taxable supplies then the scheme would not be relevant.