VAT & The EU
You are setting up a new business and want to buy some equipment from a European country, such as Italy. However, you are not VAT registered and believe that you will have to suffer the VAT charged by the supplier of the equipment.
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 you are 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 you Italian VAT.
There is no provision for recovery of pre-registration input tax incurred in other member states. You could register for VAT prior to making the purchase so that you could account for acquisition tax which would contra itself out. However, you 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 your sales which otherwise could be VAT free until your turnover exceeds the threshold (currently £85000 pa).
If you were to buy your equipment from a supplier in the UK, then you 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.
Disclaimer:- The information contained herein is given by way of general guidance only and no action should be taken solely on the basis of the information contained herein. The Avanti Group (UK) Ltd will be pleased to provide further guidance on the issues, and how they might affect you. No liability is accepted by the firm for any action taken without seeking appropriate professional advice.