Small Business VAT Registration Threshold Explained
Everything you need to know about the VAT registration threshold after April 2024.
Key Highlights
- If you are in the UK, use the HMRC VAT checker to confirm the validity of a UK VAT number. Verify the authenticity of EU VAT numbers using the VIES VAT validation tool.
What is a VAT registration number?
A VAT registration number is a unique identifier assigned to businesses to facilitate the collection, reporting, and payment of Value Added Tax (VAT). It is used to track and verify a business’s VAT transactions within a specific jurisdiction.
A VAT registration number in the UK typically begins with “GB” followed by 9 digits. In the EU, the format varies by country but usually includes a country code followed by numbers or letters unique to the business.
Find out more: What is a VAT number?
How do I get a VAT number for my small business?
Getting a VAT number for your small business varies depending on whether you are in the UK or the EU. Below are the steps for each scenario:
In the UK, you must apply through HMRC. The process requires you to provide key business and personal details. Once the application is approved, HMRC will issue your VAT registration number.
What You’ll Need:
- Company Registration Number (CRN number), if applicable.
- National Insurance number.
- A form of identification (passport or driving license).
- Bank account details.
- Company UTR number.
- Details of your annual turnover.
Applications can be submitted online through the HMRC portal.
For EU VAT registration, your business must have a permanent establishment in the EU and exceed the €10,000 sales threshold sales across EU countries. Start by selecting the EU member state where you wish to register. If your business is English-speaking, choosing a country like Ireland can simplify the process by avoiding translation requirements.
What You’ll Need:
- Certificate of incorporation.
- Articles of association.
- Proof of VAT registration in your home country.
- Evidence of business existence (e.g., from the National Registrar of Companies).
- Proof of planned trade, such as invoices or contracts.
- Power of attorney or letter of authority if a fiscal representative is appointed.
With the above, submit your application electronically to the tax authority of your chosen member state. Once the application is processed, you will receive your VAT number, enabling compliance with EU obligations.
How do I check if a UK VAT number is valid?
To check if a UK VAT number is valid, you first locate the VAT number of the company you want to verify. This can typically be found on the company’s website, at the bottom of the page, or on their invoices.
Once you have the VAT number, visit the official HMRC VAT number checker at https://www.gov.uk/check-uk-vat-number. Enter the number into the tool and follow the instructions to confirm its validity.
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How do I verify a VAT number on the EU VIES?
To verify a VAT number on the EU’s VAT Information Exchange System (VIES), visit the official VIES VAT Number Validation page. Once there, enter the VAT number you want to verify, select the corresponding EU member state, and submit your query.
The system will confirm the VAT number’s validity and display any associated business details if the number is valid.
Why is it essential to check a VAT registration number?
Verifying a VAT registration number is crucial to due diligence before engaging with a company. This ensures that the company is correctly registered for VAT, helping to avoid potential risks.
By confirming the validity of a VAT number, you:
- Prevent Fraud: Avoid dealing with companies using invalid VAT numbers, protecting your business from fraudulent transactions.
- Ensure VAT Compliance: Work only with VAT-compliant businesses, ensuring that transactions meet regulatory standards.
- Protect VAT Claims: You should safeguard your ability to claim VAT on eligible expenses, as VAT charged by an invalid number may not be reclaimable.
Checking a VAT registration number reduces the risk of financial and legal complications in your business dealings.
How do I determine if a business is VAT registered?
A legitimate VAT-registered business typically includes its VAT number on invoices or displays it on its website, often in the footer or contact section. This number is a key identifier for verifying a business’s VAT registration.
In the UK, VAT numbers usually consist of 9 digits and may start with “GB.” The format for EU VAT numbers varies by country but generally includes the country code followed by a series of numbers or letters.
Once you have the VAT number, you can verify its authenticity using official tools. For UK numbers, use the HMRC VAT number checker. For EU VAT numbers, use the VIES VAT number validation tool. These tools ensure the VAT number is valid and associated with the correct business.
How to reclaim value added tax?
Businesses registered for VAT can reclaim the VAT charged on tax-deductible business expenses. These may include goods such as office equipment or machinery and services like marketing, consultancy, legal fees, travel, and subsistence.
You must file a VAT return with your relevant tax authority to reclaim VAT. Accurate records of invoices and receipts for all VAT-eligible expenses are essential.
In your VAT return, calculate the VAT on your business expenses, known as input VAT. This is the total VAT you paid on goods and services for your business. Next, calculate the VAT you charged your customers, known as output VAT.
The difference between input VAT and output VAT determines your VAT liability. You can reclaim the difference from your tax authority if input VAT exceeds output VAT. Ensure you meet the filing deadlines and provide all necessary documentation to avoid delays in reclaiming VAT.
Which companies are exempt from VAT registration?
A company may be exempt from VAT registration under certain conditions. For instance, businesses that engage in charitable activities or primarily deal with tax-exempt goods and services are not required to register for VAT. Furthermore, businesses with a turnover below the VAT registration threshold are exempt. However, even if not required, some companies may register voluntarily to reclaim VAT on their expenses.
