Friday 12th September 2008

VAT - Checking the Numbers

Having an invalid VAT number amongst the documentation when the VATman investigates your client can be a costly problem. However, there are ways to minimise this risk.

The two danger areas for invalid VAT numbers are:

- suppliers pretending to be VAT registered; and

- exports to EU customers (if your client has them).

What's the problem with suppliers? As an unregistered person is not able to issue a proper VAT invoice HMRC will not support your clients claim to recover input VAT on that invoice, so they may well ask for it back. The most face saving thing your client can do is to check a sample of VAT numbers on an annual basis (not just new suppliers) and keep a note of this on file.

For new suppliers they should ring the VAT National Advice service (on 0845 0109000) and ask if the supplier number is valid and belongs to the address given. Unfortunately HMRC won't tell them any more than this. They should also check out the business address given on the invoice. It is now a legal requirement for any business to declare exactly where it trades from. And its best to check the phone number by using directory enquiries for the business name and address given.

Exports? Your client can only zero rate their sales of goods to VAT registered customers in member states providing they...

- obtain their customers VAT registration number and quote it in their sales invoices; and

- have commercial evidence that the goods have been removed from the UK within three months.

Sales to unregistered customers are subject to UK rates. When your client asks for a valid VAT number they might not get an immediate answer from their export customers. If this is the case, your client should always keep some form of documentation to satisfy HMRC but do ensure they follow this up to make sure they get the VAT number.

The above steps prove that your client has done their best to establish the validity of VAT numbers given to them. Your client has acted in 'good faith' and their input claim should not therefore be overturned.

 
Posted by: Bookcert Mentoring Team

Friday 12th September 2008

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