VAT registration – delays

Due to COVID-19, some businesses are experiencing long delays when registering for VAT. HMRC acknowledged this issue earlier this year and have asked businesses for their patience whilst the backlog is worked through.

What can you do while waiting for your VAT number?

Strictly speaking, if a business is registering because it has exceeded the historic twelve-month turnover threshold it must start charging VAT from the first day of the second month after exceeding that threshold. For example, if the management accounts for July 2021 show that sales have exceeded £85,000 in the previous 12 months the VAT registration date will be 1 September and the business must start charging VAT from that date. The problem is that without a VAT number, the business cannot raise a valid VAT invoice.

One option would be to wait until the VAT number is received, but this could cause serious cash flow problems as some businesses have experienced delays of up to four months.

A second option would be to invoice for the full amount, but not show the VAT as a separate line on the invoice. In this case, the total including the VAT should be shown as a single amount, and it should be made clear that a VAT invoice will be issued once the VAT number is received. However, if the customer is also VAT registered, they may be reluctant to accept an invoice that is not a valid VAT invoice as they will be unable to reclaim the input tax.

A third option would be to invoice for the net amount now, and then send the VAT-only invoice later once the number has been issued. It is advisable for businesses to discuss this upfront with customers to avoid any conflict.

Further help

If you would like any assistance in this area, please get in touch. My email is paul.newbold@torgersens.com.

About the Author

Paul Newbold

Partner

After qualifying with KPMG where he gained significant audit experience, Paul joined Torgersens in 1991 and became the firm’s audit partner in 2000. Paul employs his broad range of financial skills to provide commercial and accounting advice to a range of owner-managed businesses in the independent retail, education and professional services sectors. He also has extensive experience dealing with charities, Registered Social Landlords and not-for-profit organisations and co-operatives.   Outside of work, Paul likes to visit Eastern France and South-West German and read novels by David Morrell, Michael Blake and Harper Lee. He also likes watching films, his favourite is The Shawshank Redemption.

To get in touch please e-mail paul.newbold@torgersens.com.