VAT registration - coping with delays
September 2007
H M Revenue & Customs are currently struggling to cope with the number of new registrations for VAT - there are considerable delays. Businesses that have sent in the VAT1 registration form may have to wait months before receiving their VAT registration number.
This creates a difficult issue for these businesses. If you are required to register by a certain date, you must account for VAT to be added to your sales from this date - unless you sell goods or services that are normally zero rated or if your trade does not normally issue VAT invoices, say a hairdresser. However you cannot issue a VAT invoice until you are notified of your VAT registration number.
You will also have to secure the co-operation of your customers.
Two possible strategies you could employ between the date you are required to account for VAT and the receipt of your VAT number from HMRC are set out in the following paragraphs.
1. Increase your price to include VAT. Although you cannot charge VAT before you are registered or show VAT as a separate item on any invoices you issue, you can change your prices to include VAT. You will need to explain to your customers that you will be sending them VAT invoices later - the following words should be added to your invoice:
"This invoice is raised pending a VAT registration number. A full VAT invoice will be issued on receipt of the VAT registration number."
Once you have your registration number you should send replacement invoices, showing VAT, within 30 days. If you have asked for voluntary registration you will need to start accounting for VAT from the registration date you asked for on your application form, as long as you actually made supplies/provided services from that date.
2. Invoice net amount before VAT is added. An alternative strategy is to issue your customers with an invoice that shows the net sale value (before VAT is added). Agree that you will send a further VAT only invoice when you are issued a registration number. This will require the co-operation of your customers as they will be processing, and hopefully paying, two invoices for each supply. (One for the net sales value and one for the VAT.)
If you need our help in setting up a "coping" process, to bridge the period before you receive your VAT number, do call.
Finally do not forget to revise your cash flow management so that you save the VAT added to your sales ready for the payment of your first VAT return.
