How to check a VAT number?
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Many businesses are required to register for VAT (Value Added Tax) to charge and collect taxes on their goods and services and remit to the government.
Whether your business needs to register for a VAT number depends on your business’s taxable turnover. If your business’ VAT taxable turnover for the last 12 months is more than £90,000 (the VAT threshold), you are legally required to register for VAT.
Businesses need to check and verify their VAT number to ensure they don’t pay VAT on invalid numbers and prevent unnecessary financial losses. The government uses this number to track sales and taxes. If you do not have a valid number, you may be subject to penalties.
In this article, we will guide you on how to check a VAT number and the consequences of using an invalid VAT number.
What is a VAT number?
A Value Added Tax registration number is an identifier used for value-added tax purposes. It uniquely identifies a person or entity registered for VAT.
The number is usually composed of the business’s country code, followed by the business’s VAT registration number.
In most cases, the VAT number must be displayed on invoices and other documents related to the sale of goods and services. Businesses that are registered for VAT must charge VAT on their sales, and businesses that are not registered for VAT cannot charge VAT.
To register for VAT, businesses must first obtain a VAT registration number from their local tax authority. Once the business has obtained a VAT number, it can begin charging VAT on its sales.
What does a VAT number look like?
A UK VAT number comprises nine digits, with the prefix GB followed by the numbers. The first two letters of “GB” stand for Great Britain and the remaining seven digits are unique to every registered business.
For businesses in the European Union, their VAT numbers vary. The VAT starts with the country code followed by seven digits. These VAT numbers will be used for all transactions within the UK and EU
For businesses based in England, Scotland, or Wales, VAT numbers contain 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.
Other countries have different VAT number formats, featuring an identifying country code followed by a block of numbers or characters.
How to check a VAT number
Checking a VAT number is essential for businesses engaged in cross-border transactions within the European Union (EU). Here are the steps you can follow to verify a VAT number:
VIES (VAT Information Exchange System)
: The European Commission operates the VIES, which is a search engine (not a database) that retrieves data from national VAT databases.
You can visit the VIES tool and enter the VAT number you want to validate. The response can be either “valid” (EU VAT information exists) or “invalid” (not registered in the relevant national database).
Reasons for invalid status include non-existence, non-activation for intra-EU transactions, or pending registration.
To check the validity of a UK VAT number Click Here.
HM Revenue & Customs (HMRC)
: If VIES doesn’t provide information, you can contact HMRC and ask them to verify the number. Confirm if the VAT number is valid and associated with a specific name and address.
Service provider
: If you used an agent to register your VAT, you can contact customer service and they will be able to tell you if the number is still active or not.
If you register for your VAT number with Icon Offices, we will help you check if your VAT number is valid.
What are the consequences of using an invalid VAT number?
Using an invalid VAT number can have several consequences for businesses engaged in cross-border transactions within the European Union (EU):
Rejection of VAT exemption:
When providing goods or services to another EU country, businesses often rely on the VAT exemption. If you use an invalid VAT number, your transaction may not qualify for this exemption, resulting in additional costs.
Penalties and fines:
Tax authorities take VAT fraud seriously. Using an invalid VAT number intentionally or negligently can lead to penalties and fines.
Loss of input tax credit:
Businesses can claim input tax credits (ITCs) for VAT paid on purchases. If your supplier provides an invalid VAT number, you may lose the right to claim ITCs.
Reputation damage:
Incorrect VAT numbers can raise suspicions about a business’s legitimacy. Customers and partners may question your credibility, affecting your reputation.
Legal implications:
Using an invalid VAT number may be considered fraudulent. Legal action could follow, impacting your business operations.
Can a business trade without a VAT number?
In some cases, businesses can trade without a VAT number, but it depends on the specific circumstances and the country’s regulations. Here are a few points to consider:
Small businesses: Small businesses with low turnover may not be required to register for VAT. However, once their turnover exceeds the threshold set by the tax authorities, they must register.
Exempt supplies: Some goods and services are exempt from VAT (such as certain medical services or educational supplies). Businesses dealing exclusively with exempt supplies may not need a VAT number.
Voluntary registration: Even if not mandatory, some businesses choose to register voluntarily for VAT. This allows them to reclaim input VAT on their expenses.
Intra-EU transactions: For businesses within the EU, trading with other VAT-registered businesses may require a valid VAT number. Cross-border transactions often involve VAT registration.
Penalties: Trading without a required VAT number can result in penalties, fines, or legal consequences.
To be more tax compliant, remember to always check the validity of your VAT number. To confirm if any VAT number you receive is valid, you should check the HMRC website, the VIES website, and the service provider you used to register with the VAT number.
Once you get the VAT number, don’t forget to include it on your invoices and website so that people who do business with you will know that you are compliant.
If you want even more compliance and insight into managing your VAT, returns, and admin, Icon Offices will help you simplify the VAT management process from registration to filing your returns.
For more information, contact us at info@iconoffices.co.uk.