HMRC internal manual

VAT Registration

Voluntary registration: how to establish entitlement to register as an intending trader: preparatory activities

You should check the other guidance available on GOV.UK from HMRC as Brexit updates to those pages are being prioritised before manuals.

A person who is undertaking preparatory activities for the setting up of a business is considered to be in business for VAT purposes.

Authority for this is set down in the tribunal decision of Merseyside Cablevision Ltd (MAN/85/327, VTD 2419). In this case, the tribunal found (applying the principles of the ECJ decision in DA and AE Rompelman v Minister van Financien [1985] 3 CMLR 202 that a person who carries on activities which are preparatory to the carrying on of a business is to be treated as in business and is a ‘taxable person’ within the meaning of Article 4 of the EC’s Sixth Directive.

The definition of ‘taxable person’ for UK VAT registration purposes is discussed in the tribunal decision Golden Pyramid (L0N/91/1306Y, VTD 9133). The key point here is that, while evidence may show that a person is carrying on a business (or preparing to do so), for that person to be entitled to register and deduct input tax he must also be able to provide evidence of an intention to make taxable supplies.

Therefore, before you approve any intending trader application you must be satisfied of all of the following:

  • the applicant is ‘carrying on a business’
  • the business involves the making of (or the intention to make) taxable supplies
  • those supplies will be made by the person making the application.

Remember, the trader does not have to specify a date by which he expects to have made taxable supplies, or to estimate the value of them, but once we have accepted that a person is, or intends to be, making taxable supplies in the course of business, that person can not normally be refused registration.