According to the UK law, it is not legal for the company to operate (run business) in UK if the business’ VAT taxable turnover is above certain thresholds (£85,000 for VAT registration).
All UK businesses that turnover more than £85,000 per year need to register for Value Added Tax (VAT) in the UK. Many of your suppliers will be VAT registered and you should know your supplier's VAT number as it should be clearly displayed on things like invoices.
In this blog we look at the importance of VAT numbers, how you can easily find a company's VAT number and VAT thresholds and compliance. Let's start with the basics...
What is a VAT registration number?
A VAT registration number is a unique ID number provided by HMRC to UK businesses that either voluntarily register for VAT or will need to compulsory register if they turnover a certain amount of money in a financial year.
VAT numbers vary in format across the EU depending on the country the business is based in. Each EU country has its own EU country code. The United States and other countries will not use a VAT system, which means you can’t claim their sales tax back.
What does a VAT number look like?
For businesses based in England, Scotland or Wales, a UK VAT number contains 11 characters – the letters ‘GB’ followed by 9 numbers. For example, GB 123 4567 89.
Businesses in Northern Ireland have VAT numbers beginning with the letters ‘XI’ instead of ‘GB’. For example, XI 123 4567 89.
Depending on the country, a VAT number comprises of between 2-12 alphanumeric characters with the initial two representing the nation in which the business is registered. All the countries in the European Union (EU) currently follow two letter country codes. It is useful to know the relevant country codes. You can find country codes for each EU country here. Note the following are not part of the EU VAT area:
- The Channel Islands
- Mount Athos
- San Marino
- Vatican City
Do all businesses have VAT registration numbers?
No, not all businesses do have a VAT number. Only businesses that are registered for VAT will have a number.
If you register for VAT in the UK when you receive your VAT registration number, you should display it on the following:
- all invoices you send out to customers
- credit notes, receipts etc.
- your business website
You will need to provide your VAT number when sending VAT Returns to HMRC, paying or reclaiming VAT, and dealing with certain suppliers.
If you purchase goods or services from VAT registered companies in the EU, you should also supply your VAT number. By doing so, they will be able to zero-rate (0%) the VAT charge on your order.
Why is VAT registration number important?
Businesses in the UK can only claim VAT back on supplies if they have an applicable VAT invoice from a seller and are VAT registered themselves.
When you will use your VAT registration number
If your business has a taxable turnover in excess of the VAT registration threshold (currently £85,000), you are legally required to register for VAT. If your taxable turnover is below this amount, you are allowed to register for VAT voluntarily. This can be beneficial if you run a business where you pay a large amount of VAT on suppliers or where you think you will hit the VAT registration threshold soon.
Once registered you will receive a VAT registration certificate from HMRC. Keep this and your VAT number safe as you will need to display or give a valid vat registration number in the following circumstances:
- Creating a VAT online account with HMRC.
- Completing quarterly VAT returns for HMRC.
- Paying your quarterly VAT bill.
- Contacting HMRC to discuss your VAT account.
- Reclaiming any VAT paid on goods and services purchased for business use.
- Issuing VAT invoices to customers.
- Setting up accounts with some suppliers.
- To your accountant or tax advisor if they are dealing with your VAT and other areas of taxation.
How to find a business' VAT number
The first place you can look for a VAT number is on a business' invoice to you. If the business is VAT registered, their unique VAT registration number should be on all their invoices. Without this on their invoice you won't be able to reclaim the VAT you've paid to them.
You could also look on their website. If you still can't find it, then you could contact the company directly and ask them for their VAT. However, how do you know if a VAT number is valid?
Why it’s important to check a VAT number
You should check a VAT number to ensure its correct because if you enter an invalid number on your own VAT return, then you could invalidate your invoice and you won't be able to reclaim the VAT you paid – leaving you out of pocket.
Often innocent mistakes are made, and an incorrect vat number used, these can be rectified. However, if you are dealing with a new supplier, it is worthwhile checking the VAT number against that company name as some people try to fraudulently use someone else’s VAT number and charge VAT when they shouldn't.
Businesses in the UK can only claim back VAT on supplies if they have valid VAT invoice from a supplier. The details needed on the VAT invoice include:
- the name and address of the business
- invoice number
- the goods and services provided
- the cost and the VAT
- suppliers VAT registration number
It’s not difficult to perform a quick check (see below).
How do I check a VAT number is valid?
If you're dealing with a new supplier, we recommend you use one or more of the steps below. To check UK VAT numbers:
- Check the number is 9 digits long (if a UK supplier)
- Check online using HMRC website to check a UK VAT number.
- Call the HMRC VAT helpline on 0300 200 3700.
Have your own business VAT number to hand to use the services above.
However, there are certain limitations with using the methods above. Firstly, HMRC can only provide verification on the VAT number for businesses registered in the UK and their VAT helpline is only open during working hours.
Checking EU VAT numbers online using the VAT Information Exchange System (VIES)
To check if an EU or Northern Ireland VAT number is valid, use the VIES VAT Validation Service.
If the website shows a VAT number is invalid, you should check with the company to make sure you have the correct number. If something looks suspicious you can inform them that the VIES site is displaying the number as invalid so they can correct any problems with this.
How dns accountants can help
Here at dns accountants we offer a wide range of VAT service and advice including:
- VAT registration & VAT returns service
- VAT computations
- Handling correspondence with HM Revenue and Customs (HMRC)
- Reclaim VAT
We support thousands of VAT registered businesses across the UK so, for all your VAT needs, call our team on 03300 886 686, or email on firstname.lastname@example.org.
Any questions? Schedule a call with one of our experts.
Whether you prefer to meet and speak over the internet, or if you prefer an in person conversation we can help you with your preference.
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