When a business sets up a new purchase ledger account for example, it is good practice to check the supplier’s VAT number because, if it is invalid, so is the tax invoice and HMRC may disallow your input tax claim. It is equally important when dealing with sales to businesses in other EU Member States because if you get the VAT number wrong you should not zero-rate the sale and HMRC will assess you if you have.
No doubt the majority of such cases are innocent errors, such as printing mistakes. However, the fraudulent use of another trader’s number is prevalent in certain sectors of business, so checking is potentially a valuable precaution.
There are different methods of checking that a VAT number is correct. For the UK you can ring the HMRC helpline (VAT Helpline: 0845 010 9000 open 8.00 am to 8.00 pm Monday to Friday) or use a mathematical check that the number is correct.
To check that a UK VAT number is valid you should first check that it is 9 digits long. (This does not include the GB which is sometimes stated at the beginning). The first 7 digits are random numbers and the last 2 digits are based on a formula using the first 7 numbers. If the mathematical check works out it only shows that the VAT number is valid, not that it is proper to the business quoting it or that it has not been de-registered.
You can check an EU VAT number (including the UK) on-line (link here). The EU data base is only updated monthly so including delays in the local Member States tax authorities the data could be 6 – 8 weeks out-of-date. As such a business may have registered for VAT but not be on the system yet or may have de-registered and still appear on the system. Another downside of the system is that you can only check one VAT number at a time rather than batches so if you have a several numbers to check it can be time consuming.
Keep a record of the checks you have made and take a screen print of the EU website showing that the VAT number was valid at the time that you checked it if HMRC queries it.
To confirm that both the number is valid and that it belongs to the trader quoting it, ring the VAT Helpline.
Unfortunately, HMRC will only tell you whether that number belongs to the trader whose name and address have been quoted. The Data Protection Act stops them giving information about another trader.
There was a change in the VAT number sequence which was phased in at the end of 2008 and beginning of 2009 so you may have to use both systems to be sure a VAT number is invalid.
When completing an EC Sales Lists you will also need to obtain your customers valid EU VAT number, including the 2 letter national prefix. You should check the validity of your customer's VAT registration number on a regular basis, to ensure that the number has not been deregistered.
