When you apply for VAT registration, there will be a period of overlap between submitting your application and receiving your VAT number from HMRC. During this time, you are not allowed to charge or display VAT on your invoices. However, you are still required to pay the VAT amount to HMRC for any sales made during this period.
So, how should you handle invoicing and accounting in this situation?
VAT Registration Process
Upon registering for VAT, you will receive a VAT registration certificate containing the following information:
- Your VAT number
- The deadline for submitting your first VAT Return and making payment
- The “effective date of registration,” which is either the date you exceeded the threshold or the date you voluntarily requested registration. This date marks when you become liable for VAT on your taxable sales, regardless of whether you have charged VAT to your customers. It is crucial to ensure the accuracy of this date.
Invoicing before Receiving Your VAT Number
It is possible to wait until your VAT number is confirmed before invoicing your sales, but we do not recommend this approach. Invoicing promptly increases the likelihood of receiving payment sooner.
In fact, the process is straightforward: you adjust your prices to account for the VAT and inform your customers accordingly. For instance, if you would have originally charged a customer £1000 for a product subject to the standard VAT rate, you increase the price by 20% and charge them £1200.
Confirmation of Your VAT Registration Number
Once you obtain your VAT number, you can reissue the invoices to include the VAT amount, enabling your customers to reclaim the VAT on their purchase from you.
Invoicing after Receiving Your VAT Number
After successfully registering for VAT and receiving your VAT number, all sales subject to VAT must be invoiced using proper VAT invoices. Refer to the guidelines on the information required on a VAT invoice for further details.