In Max Investments Ltd v HMRC [2016] UKFTT TC05063  an application to backdate VAT registration was refused following confusion as to whether construction costs were goods or services.

  • In 2008 Max Investments Ltd (the company) began building a commercial property.
  • In 2012 the building was sold when it was 90% complete.  The sale was standard rated as the property was less than three years old.
  • In December 2011 the company applied to be VAT registered from March 2011, believing that this would enable all pre-registration input VAT on costs since 2007 to be reclaimed as all goods were still on-hand at the date of registration.
  • On the first VAT Return to February 2012 the company reclaimed £128,000 input VAT relating to the costs of construction services and materials provided by the builders.
  • HMRC later rejected the bulk of this claim as the costs were for services and not goods, and were incurred more than six months before the date of registration.
  • In September 2014 the company requested that the registration be backdated further, to March 2008, and HMRC refused.

The First Tier Tribunal (FTT) found that the misunderstanding of the company over whether the builders’ costs were for goods or services was genuine.  HMRC should have considered this but did not, and so their decision not to allow the backdating was unreasonable.

Despite finding unreasonableness, the FTT dismissed the appeal finding:

  • There was a significant delay of almost three years between the application for registration and the application to backdate the registration.
  • A request to backdate registration should be made before the due date of the first VAT Return, and this condition was not satisfied.


Pre-registration input VAT

Is voluntary VAT registration worthwhile (includes details about backdating registration date)

Case reference:  Max Investments Ltd v HMRC [2016] UKFTT TC05063