I remember in the ‘old’ days, when you used to be able to file your application for GST registration, with IR accepting any effective date requested, although they would sometimes get a little touchy if the date was more than six months old.
Those memories are fast disappearing however, particularly since the 2018 release of SPS 18/03, and the common practice nowadays, that regardless of what effective date you request, IR uses the date the application is filed, and it is like trying to pull teeth to get a backdated approval.
A recent case I had, an overseas client should have registered in October 2019, as their invoices from day one, reflected GST being charged on the services supplied. The application was referred to the customer compliance team, and I was informed in no uncertain terms, that unless I could produce evidence of the obligation for the client to be registered some 12 months ago, my request for backdating would be denied. Luckily this time around, proving the requisite obligation was simple, as I already had access to the client’s Xero file, so I could provide the Revenue with copies of the first tax invoices issued, reflecting the GST charged.
Much harder scenarios to overcome however, are those related to property developments, particularly where an existing residential dwelling is acquired, with plans to demolish and put four houses on the same footprint. Clearly the sale of any one title within the coming 12 months would exceed the compulsory registration threshold and consequently dictate the obligation to register for GST now (plus the client wants their second-hand goods claim yesterday).
Once again, reminiscing on the days of old, a statement of the client’s intentions to develop the land and sell within 12 months, was sufficient to have the Revenue sign off on a backdated registration date. These days however, you need to provide fully detailed business plans, plus the kitchen sink at a minimum, to prove that your client had an obligation to register on the date requested, and that it is not a voluntary registration scenario – which the Revenue’s SPS 18/03 stresses will see the date of the registration application being used, unless there are ‘exceptional circumstances’ as to why your client is late in registering.
To remind taxpayers of the SPS 18/03 commentary, IR updated their website on the 23rd November, to confirm that ‘The start date of a GST registration is usually the date the application is made.’ So if you have a client come to you, requesting a backdated registration date to enable them to recover some costs already incurred, it would be prudent to put them on notice of IR’s present stance, and that they may just have to wear the GST charged on those initial costs (or perhaps recover them more slowly via the annual adjustment period claims process).