Charging VAT while waiting for VAT Registration Number

I guess you’ve received an invoice with VAT on it from someone awaiting registration? Just pay the original amount and tell them that you’ll pay the VAT when you get a proper VAT invoice.

Posted under Courier Financial Issues, VAT

Posted by Alec at 12:48 pm, June 12, 2008

3 Comments so far

  1. Alec added on  June 12th, 2008 at 12:51

    You’re not allowed to show the VAT as a separate amount unless you’ve been issued with a VAT number.

    There are two ways of handling it – you either issue your invoice of £100 with a note on it ‘VAT Registration applied for – a further invoice for the VAT due on this invoice will be issued once registration is confirmed’ (or something along those lines) or you issue an invoice for £117.50 INCLUDING VAT with a note ‘VAT Registration applied for’.

    It’s illegal to issue an invoice showing VAT as a separate amount until you’ve got a VAT number to put on the invoice.

  2. Alec added on  June 12th, 2008 at 15:31

    That’s one of the options I gave above Mick and HMRC’s suggestion may be fine in the world of civil servants but it’s not much use in a real business situation.

    If you, quite correctly, issue a VAT inclusive invoice without a VAT number then most VAT registered companies would refuse to pay the VAT element of the invoice until a proper VAT invoice was issued, and they’d be perfectly within their rights to do so. Many would use it as an excuse to delay payment of the whole invoice until a full VAT invoice was received.

    The other option causes far fewer problems, as long as you add a note on the invoice that an invoice for the VAT will be sent after registration.

    If you’re dealing with non-registered customers, or your customers have agreed for you to use the ‘inclusive’ method then it doesn’t really matter either way.

  3. Alec added on  June 12th, 2008 at 15:36

    Sorry Mick, I just re-read your message. That’s entirely incorrect, they don’t have to pay any VAT unless there’s VAT number on the invoice. Until registration is confirmed by HMRC then there’s not even any guarantee that they’ll allow you to register, so how can you possibly charge VAT until the registration’s been confirmed?

    Whoever tolds you that is wrong.

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