All you need to know about VAT numbers

Setting up a company to have EU-wide business relations means an in­ter­na­tion­al audience, more sales potential, and also, less ap­peal­ingly, more VAT paperwork. In com­par­is­on to trans­ac­tions within the UK only, value added tax on trans­ac­tions between companies belonging to different EU member states follow different prin­ciples, so it’s a good idea to wise up on all things VAT to avoid com­plic­a­tions in the future.

A VAT re­gis­tra­tion number is important for EU sales trans­ac­tions. Here we explain what the VAT iden­ti­fic­a­tion number is, who needs it and how to apply for it.

The value added tax re­gis­tra­tion number (ab­bre­vi­ated ‘VAT number’, or ‘VAT reg no.’) is the in­di­vidu­al iden­ti­fic­a­tion number of companies that operate in­ter­na­tion­ally within the EU. A VAT number enables in­ter­na­tion­al tax au­thor­it­ies to track and tax the trans­ac­tions of these companies. A VAT iden­ti­fic­a­tion number is crucial for all important ad­min­is­trat­ive pro­ced­ures of EU au­thor­it­ies.

This means that VAT numbers are similar to normal tax IDs, which most citizens are familiar with from their personal tax returns. However, the VAT number and tax number are by no means identical. A tax ID number is generally assigned to every taxable person. A VAT re­gis­tra­tion number, in turn, is only assigned to companies that have EU wide trans­ac­tions.

Every company that sells goods or services in other EU countries requires a VAT number. The VAT number helps regulate the often complex tax pro­ced­ures within the EU. However, if an business trades ex­clus­ively within the UK, it does not need a VAT re­gis­tra­tion number- the regular tax iden­ti­fic­a­tion number is enough.

But why is an ad­di­tion­al tax number for EU trans­ac­tions necessary? This has to do with reg­u­la­tions con­cern­ing the taxation of turnover in EU trans­ac­tions. However, if a UK company does business with a company from another EU country (intra-EU de­liv­er­ies), the reverse charge mechanism applies in most cases. This means that it is not , as is usual, the service provider who pays the sales tax, but the service recipient.

The tax burden is therefore reversed and is now borne by the last consumer in the country of des­tin­a­tion (country of des­tin­a­tion principle). For the service provider, on the other hand, the delivery or service is tax-free. All they have to do is to report their EU trans­ac­tions regularly in a EC sales list return to HMRC. For these trans­ac­tions you’ll need the vat iden­ti­fic­a­tion number: so that the business trans­ac­tions are traceable for the in­ter­na­tion­al tax offices and can be taxed correctly, each company in the EU receives an in­di­vidu­al sales tax ID.

There are two main instances in which you’ll have to provide your VAT number - on invoices, and on your EC sales list form, which you’ll need to return to HMRC.

On an invoice for trans­ac­tions within the EU, you must always provide your VAT number, as it replaces the tax number. It is not necessary to specify the VAT number if a delivery or service is provided to private in­di­vidu­als or companies without a VAT re­gis­tra­tion number. In this case, the reverse-charge procedure does not apply and the VAT iden­ti­fic­a­tion number does not have to be shown.

You’ll also need to provide your VAT number in EC sales lists. Any company that has EU sales outside of their own country must submit an ESL on a monthly or quarterly basis. This report must contain both the VAT number of your own company and that of the foreign company.

It is advisable to check that the VAT number of other busi­nesses are valid, in order to avoid confusion down the line. Many VAT number errors will simply be typing or copying errors, but it is sometimes the case that another business’ VAT number is fraud­u­lently used, and double checking each trader’s number is a good pre­cau­tion to take. In order to check a UK VAT number, you can always call HMRC on:

• 0845 010 9000 (open weekdays from 08:00am to 08:00pm)

Al­tern­at­ively, it is possible to check an EU VAT number on the European Commision website here VIES VAT number check, but it should be noted that this database is only updated every month, and this does not account for any delays. This means that the data could be up to two months out of date, so it is advisable to check up on the VAT numbers fre­quently.

It is possible to register your business for VAT online, which creates a VAT online account and registers your business for VAT, which is important so that you can submit your VAT returns to HMRC. Once you have re­gistered for VAT, HMRC will send you a cer­ti­fic­ate con­tain­ing your VAT number, either to your online account or in the post. HMRC states that it takes around one month to receive it. In the meantime, make sure that you keep records of all the trans­ac­tions your business makes. Here’s how to register your business for VAT, through online and paper forms:

Online re­gis­tra­tion

This step-by-step guide is for new users, who do not already have an online log in (Gov­ern­ment Gateway ID). If you already have one, then you can sign in and complete a VAT re­gis­tra­tion under the ‘Your HMRC services à register for HMRC taxes’.

1. Go to the gov­ern­ment gateway website Click on the ‘register as an or­gan­isa­tion’ button
2. Fill out the forms with your business in­form­a­tion. Make sure you take note of your gov­ern­ment gateway ID.
3. There will be an option ‘register for HMRC taxes’, and then you can follow the on screen in­struc­tions.

Paper form re­gis­tra­tion

There may be instances when you cannot register online. For example, if you want to apply for a ‘re­gis­tra­tion exception’, if you’re joining the Ag­ri­cul­tur­al Flat Rate Scheme, and finally if you want to register divisions or business units of a body corporate under separate VAT numbers. Fur­ther­more, it may just be that you want to register via post, even if you don’t fulfil one of the above mentioned cat­egor­ies. It is possible to register via post using three forms:

• VAT1A – use this if you are an EU company which ‘distance sells’ to the UK
• VAT1B  - use this form if you import goods with a total value of more than 85,000GBP from another EU member state
• VAT1C – use this form if you dispose of assets on which 8^th of 14^th Directive refunds have been claimed

Once you have filled out and signed these forms, HMRC will send you your cer­ti­fic­ate, which contains your VAT number. Then you can sign up on for a VAT online account, and complete your VAT returns online.

Please note the legal dis­claim­er relating to this article.