Summary. Navigating VAT registration requires understanding timing and invoicing nuances. Businesses can’t charge VAT without a registration number, but they can anticipate the costs. Options include invoicing without VAT and adding it later, or including a provisional amount without labelling it as VAT. Proper invoicing ensures compliance and clarity for customers.
VAT registration for your business may be voluntary or it may be compulsory. However, either way, it will still take time for HMRC to implement you into the system and issue a registration number. So what do you do when it comes to invoicing for VAT before registration?
How long does it take?
The VAT registration period can vary, depending on certain factors. As you probably suspected, there are factors that help determine the time it takes HMRC to register your business for VAT. For example, whether your business has started trading or if you’re backdating your registration. You may be waiting a month or possibly even longer before you receive your registration number. During this time you will still need to issue clients with invoices that manage your VAT correctly.
How do you account for VAT that you don’t charge?
HMRC’s advises that: “You cannot charge or show VAT on your invoices until you get your VAT number. However, you’ll still have to pay the VAT to HMRC for this period.” This construes that you will be footing the bill if the date you register from is before HMRC notifies you of your registration number. However, this implication is not true.
Our advice when it comes to registering is this:
- You can ask HMRC to apply for your VAT registration number from a future date. However, this only applies if you are registering voluntarily. Generally, one month in advance is plenty of time and you will not need to charge your customers VAT until this date.
- Special rules apply which allow you to claim VAT on pre-registration expenses, this means you won’t be out of pocket on purchases. Make sure you are up to date with these rules.
Be conscious of what you are charging
If you are delivering goods to a customer but billing them at a later date, and your VAT registration starts somewhere in-between, you need to be careful about how much VAT you charge. It’s important to ensure that where you supplied goods before the registration you don’t charge VAT – even though you’re registered when you bill your customer.
Invoicing clients for VAT before registration
There are a couple of options if you need to invoice a customer after the date of registration has passed, but before your VAT number arrives:
- A simple solution is to invoice the customer excluding VAT, then send a second invoice for VAT only, once you have received your registration number.
- A second option is to issue an invoice with the total amount inclusive of what the VAT amount will be, but do not break it down or call it VAT (this is illegal), then send an amended invoice once you have received your registration number showing the additional amount as VAT.
Make sure that whichever option you choose, you are clear with your invoicing. This will help to avoid customer confusion and any error in the handling of the VAT. In addition to the above, to avoid any mal interpretation, we advise that if you choose to add an additional amount to your invoice that is equal to the VAT amount. Then you should also include a description that says something to this effect: “This charge is in lieu of VAT pending registration. You cannot reclaim it on your VAT return until we send you a VAT invoice.”
Once you are VAT registered it is a good idea to check the information you currently include on your invoices. You may be required to display further details to ensure you are acting within the law.
Get in touch today
If you have any questions about VAT registration or need VAT support and advice, then Contact Thomas Nock Martin accountants today. Our team will be happy to help and can check that your company is operating within the law. Alternatively, call us on 01384 261300.
If you have found this blog helpful, you may wish to read our previous blog on Making Tax Digital.