Intending Trader VAT Registration

An ‘intending trader’ is a business that does not make taxable supplies but intends to do so in the future. The ‘intending trader’ registration for VAT allows a business to register for VAT before starting its taxable activities. This is particularly useful for businesses that incur significant VAT on start-up costs or during the initial stages of trading.

To register as an intending trader for VAT, a business must provide evidence that it intends to make taxable supplies within a reasonable time (usually within 30 days). The evidence required may include the following:

1. A detailed business plan demonstrating the intention to make taxable supplies.
2. Contracts or agreements with suppliers or customers.
3. Marketing materials or advertisements show the business actively promotes its goods or services.
4. Lease agreements or property purchases for business premises.
5. Evidence of investment in equipment, machinery, or other assets necessary for the business.

HMRC guidance on registering as an intending trader can be found in VAT Notice 700/1: Should I be registered for VAT?, available on the UK Government website. This notice provides information on the registration process, the required evidence, and the responsibilities of an intending trader.

Pros of registering as an intending trader:

1. Early VAT recovery: Registering as an intending trader allows businesses to reclaim VAT on start-up costs and initial expenses, even before making taxable supplies. This can improve cash flow during the initial stages of the business.
2. Preparation for future VAT obligations: Early registration for VAT helps a business familiarize itself with VAT processes and requirements, making it easier to manage VAT obligations once taxable supplies begin.

Cons of registering as an intending trader:

1. Administrative burden: VAT registration adds an administrative burden to a business, including submitting regular VAT returns and maintaining VAT records.
2. Potential HMRC scrutiny: Registering as an intending trader may attract more attention from HMRC, as they will want to ensure that the business genuinely intends to make taxable supplies and is not simply trying to reclaim VAT without the intention to trade.

Commercial property developers may face specific challenges related to VAT registration as intending traders. These challenges can include the following:

1. Timing of VAT recovery: Commercial property developers often incur significant VAT on construction and development costs before making taxable supplies. Registering as an intending trader can help them recover this VAT earlier; however, the recovery timing may not align with their cash flow needs.
2. Complex VAT rules: Commercial property transactions can involve complex VAT rules and varying rates, making VAT compliance more challenging for developers.

In summary, registering as an intending trader for VAT can be advantageous for businesses that incur significant start-up costs subject to VAT. However, it also comes with an administrative burden and potential HMRC scrutiny. Commercial property developers may face specific challenges related to VAT recovery timing and complex VAT rules. It is essential to consult HMRC guidance and seek professional advice to ensure compliance with tax rules and regulations.

You can call us to discuss your busines tax compliance with our specialist VAT advisors.