Value Added Tax (VAT) is a tax on the supply of goods and services in the United Kingdom. It is charged as a percentage of the price of the goods or services being supplied. All businesses that are above the VAT registration threshold are required to register for VAT and obtain a unique VAT registration number.
The VAT registration number, often referred to as the VAT number, is the unique reference number that a business receives when they register with HM Revenue & Customs (HMRC) for VAT. The VAT number allows a business to charge, collect and reclaim VAT. It also enables the business to trade freely throughout the European Union (EU).
What is a VAT number?
A VAT number, also known as a VAT registration number, is a unique 11 digit reference number that is assigned by HMRC to a business when they register for VAT. It is the primary means of identifying a business within the VAT system.
The VAT number confirms that a business is registered to charge and reclaim VAT. It allows HMRC to identify which businesses are charging VAT on their goods and services. The VAT number must be displayed on all VAT invoices and receipts issued by a VAT registered business.
The structure of a VAT number is as follows:
- The first 2 digits are the country code. For the UK this is GB.
- The next 3 digits are allocated by HMRC relating to the type of registration.
- The next 4 digits are a sequential registration number.
- The final 2 digits are a check code.
For example, a typical GB VAT number would be: GB123 4567 12
Who needs a VAT number?
A VAT number is mandatory for businesses that are registered for VAT. You must register your business for VAT if your taxable turnover is above the VAT registration threshold.
The current VAT registration threshold is £85,000. This means that your business must register for VAT if your taxable turnover exceeds this threshold in a 12 month period. There are some exceptions where you can voluntarily register for VAT if your turnover is below the threshold.
The following businesses are required to have a VAT number:
- Sole traders, partnerships, limited companies and any other business structure with taxable turnover over £85,000 per year
- Businesses that sell digital services (such as ebooks or software) to consumers in the EU, regardless of turnover
- Businesses that buy goods from EU suppliers over a certain value
- Businesses that voluntarily register for VAT even if below the threshold
If your business is VAT registered then you must display your VAT number on all sales invoices and receipts to your customers. You should also provide your VAT number to suppliers when making business-to-business purchases.
How to apply for a VAT number
Applying for a VAT number is straightforward. You can register online with HMRC to obtain your VAT number. Here are the steps involved:
- Check if your business turnover is over the VAT registration threshold of £85,000 per year. Remember this includes your taxable sales.
- Collect together all the details required including business name, address, business activities, accounting dates, bank details etc.
- Register online with HMRC at www.gov.uk. Navigate to the ‘Register my business for VAT’ section.
- Provide all the requested information about your business to HMRC.
- HMRC will email you a unique 11 digit VAT registration number within a few working days.
- Add your new VAT number to your invoices and receipts.
The online VAT registration process takes around 10 minutes if you have all your business information to hand. Once registered, you can start charging VAT right away. Your VAT reporting obligations to HMRC will start either immediately or at the end of the first VAT quarter.
How long does it take to get a VAT number?
In most cases, you will receive your new VAT number within a few working days of completing the VAT registration process. Here is a typical timeline:
- Day 1 – Complete online VAT registration application
- Day 2-5 – HMRC processes application
- Day 5-7 – VAT registration certificate with VAT number issued to your email
So within approximately 5-7 working days, your business will have its unique VAT number and can begin charging VAT. In some rare cases it may take slightly longer if HMRC require additional information or documents from you.
As soon as you receive the VAT registration certificate from HMRC, you can start using your new VAT number. You must display it on all VAT sales invoices and receipts.
When to start using your VAT number
You can start using your new VAT number as soon as you receive your VAT registration certificate from HMRC. This will include your 11 digit VAT number.
From this point onwards you must use your VAT number on all sales invoices and receipts where you are charging VAT to customers. You should also make your suppliers aware of your VAT registered status.
Your VAT reporting obligations to HMRC will commence either:
- Immediately – If you register voluntarily or late
- Start of next VAT quarter – If register on time
As an example, if you registered voluntarily on 5th January, you must start using your VAT number immediately and report VAT from 5th January. If you registered before the VAT threshold on 1st April, your VAT returns would start at beginning of the VAT quarter on 1st April.
How to find a company’s VAT number
There are several ways to find out the VAT number for a business:
- Ask the company to provide you with their VAT number
- Check sales invoices and receipts from the company
- Look for the VAT number displayed on the company’s website
- Use the HMRC online VAT number checker
- Search the Companies House database
The quickest and easiest way is to simply ask the company to provide you with their VAT number. All VAT registered businesses in the UK have an obligation to display their VAT number on sales documents such as invoices and receipts.
You can also search for a company’s VAT number using the HMRC online VAT checker. This allows you to search for a business by name or address to look up their VAT number. This can be useful to validate a VAT number you already have.
How to validate a VAT number
It is important for VAT registered businesses to validate any VAT numbers received from suppliers or customers. This verifies that the number is valid and belongs to that business. Here are some ways to check if a GB VAT number is valid:
- Check the format – Should be GB followed by 9 digits plus 2 check digits
- Check the VAT number prefix – The first 3 digits relate to the type of registration
- Use the HMRC VAT number checker – Enter VAT number to validate against business name/address
- Check against VAT Information Exchange System (VIES) – For EU cross border VAT transactions
- Ask supplier to confirm VAT details on company letterhead
Validating VAT numbers is important to prevent VAT fraud. It ensures that you collect and pay the right amount of VAT and can reclaim input VAT correctly.
How to display your VAT number
Once registered, your business must clearly display its VAT number on all VAT sales invoices and receipts issued to customers. This is a legal requirement for all VAT registered businesses in the UK.
Some best practices for displaying your VAT number include:
- Show on all sales invoices and receipts
- Display prominently near the top of invoices
- Include on your website – e.g. within the footer
- Add to email signatures
- Show on other sales documents such as order forms, statements etc
You may also choose to display the VAT number on other documents such as:
- Business stationery like letterheads and compliment slips
- Catalogues, brochures, menus
- Advertising and marketing materials
- Signage and vehicles
How to change or update a VAT number
There may be certain situations where your VAT registered business needs to update its VAT registration details with HMRC:
- Business changes its name or address
- Business changes legal entity type e.g. becomes a limited company
- Business is sold or transferred to new owner
In these situations, you may need to change or update your VAT number to reflect the new business details. Here is the process to follow:
- Inform HMRC of the changes to your business
- HMRC will cancel your existing VAT registration
- You will need to complete a new VAT registration application
- HMRC will issue your business a new replacement VAT number
- Notify customers and suppliers of your new VAT number
So while your VAT number may change due to business changes, the process to update it is relatively straightforward via HMRC. Be sure to allow sufficient time to go through the update process.
How to cancel a VAT number
There are specific circumstances where you may need to cancel your VAT registration entirely:
- Business ceases trading
- Turnover falls below VAT registration threshold
- Business is sold or changes ownership
To cancel your VAT registration, you must inform HMRC and complete a VAT7 form. Here is an overview of the VAT cancellation process:
- Submit VAT7 online at least 7 days before you want to cancel
- Calculate final VAT return up to cancellation date
- Submit final VAT return and payment to HMRC
- Keep business records for VAT purposes for 6 years
- HMRC de-registers your VAT number
Once de-registered, you must stop charging VAT and remove your VAT number from all sales invoices and documents. Any VAT refunds due can be reclaimed from HMRC via your final VAT return.
Offences relating to VAT numbers
There are certain rules and regulations surrounding the use of VAT numbers that if not followed can potentially lead to fines or other penalties:
- Failure to register for VAT when turnover exceeds the threshold
- Failure to display VAT number on sales invoices and receipts
- Providing false VAT registration details
- Fraudulent use of another business’s VAT number
- Issuing sales invoices showing VAT when not VAT registered
HMRC treat VAT offences very seriously. Penalties can range from financial penalties of up to 100% of underpaid VAT to criminal prosecution in serious cases of VAT fraud.
VAT registration thresholds
The VAT registration threshold determines whether a business is required to register for VAT or not. The current VAT threshold in the UK is turnover above £85,000 per year. This VAT turnover threshold normally changes at the beginning of every financial year.
The VAT registration threshold requires you to look at your VAT taxable turnover for the previous 12 months or next 30 days. This includes your sales of goods and services that are subject to VAT. If this turnover figure exceeds the registration threshold, you must register.
The VAT registration threshold does not include:
- Sales that are exempt from VAT
- Sales of items you bought only to resell
- Any sales made outside of the UK
There is no obligation to register for VAT in the UK if your turnover is below the VAT threshold. However, you can voluntarily register for VAT if your turnover is over the much lower voluntary registration threshold.
Compulsory VAT registration threshold
The compulsory VAT registration threshold is set by the UK government each year. From 1st April 2022 the compulsory VAT threshold is taxable supplies of £85,000 per year.
This means that any business with VAT taxable turnover of £85,000 or more must register for VAT with HMRC.
Voluntary VAT registration threshold
The voluntary VAT registration threshold is £1,000 per year. This allows smaller businesses with turnover under £85,000 the option to voluntarily register for VAT if they wish.
Reasons they may choose to voluntarily register include:
- Reclaim VAT on expenses
- Appear larger to potential customers
- Trade with other VAT registered businesses
The voluntary VAT threshold gives small businesses more flexibility in how they handle VAT.
VAT registration exceptions
In most cases, businesses are only required to register for VAT if their turnover is above the VAT registration threshold. However, there are some VAT registration exceptions where a business must register regardless of turnover level.
Exceptions where a business has no minimum turnover limit for VAT include:
- Based outside the UK and sells digital services to UK customers
- Based outside the EU and sells goods from UK stock
- Buying goods from EU above acquisition threshold
In these specific situations, the business has no choice and must register for UK VAT and obtain a VAT number even if turnover is negligible.
Some other typical VAT registration exceptions include:
- Non-profit organisations
- Farmers flat rate scheme
- Connected companies
- Business partnerships
Even if below the VAT turnover threshold, businesses may still need to register if they fall into these categories. The VAT registration exceptions prevent certain organizations from avoiding VAT.
Table summarizing key VAT registration thresholds
| VAT Threshold Type | Turnover Threshold |
|---|---|
| Compulsory Registration | Over £85,000 |
| Voluntary Registration | Over £1,000 |
| Digital Services | No minimum threshold |
| EU Acquisitions | Over £85,000 |
Conclusion
Obtaining a valid VAT registration number is a crucial step when registering a business for VAT. Displaying your unique VAT number on sales documents creates transparency and ensures the correct VAT liabilities.
By following the proper VAT registration process, validating supplier’s VAT details, and displaying your VAT number correctly, businesses can remain fully compliant with UK VAT rules and regulations.