VAT Points of Practice
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Andrew Needham, Director of VAT Solutions (UK) Ltd, explains how to
check VAT numbers and provides some VAT tips.
Worried you’ve been given a dodgy VAT number?
It’s possible to make several checks on whether a VAT registration number
shown on an invoice is valid. The validity of the number is important because
the purchaser cannot recover VAT incorrectly charged by an unregistered trader,
unless HMRC allows them to do so by concession.
The first thing you can do is an online check at the EC VIES website. It can
be found via the following link:
http://ec.europa.eu/taxation_customs/vies/vieshome.do?selectedLanguage=EN.
However, this check will only tell you if it’s a real number, not who owns it.
If you want to check ownership details too, you should contact HMRC’s
National Advice Service (0845 010 9000). The number, name and address details
you have can be given to HMRC, who will then confirm whether the details they
have match with yours. If different, they will not be able to divulge the
details they have, but by that point, you will already know you have a problem!
If you don’t want to contact HMRC, or don’t have immediate access to the
Internet in a given situation, you can do a manual check using the ‘modulus
97 check’, which works as follows:
1. The first seven digits of the VAT registration number are listed
vertically.
2. Each digit is multiplied by a number, starting with 8 and decreasing to 2.
3. The sum of the multiplications is calculated.
4. 97 is then subtracted from the sum as many times as necessary to get to a
negative number.
5. The negative number is the same as the last 2 digits of the VAT
registration number if valid.
Example calculation
VAT registration number 339 0727 47
3 * 8 = 24
3 * 7 = 21
9 * 6 = 54
0 * 5 = 0
7 * 4 = 28
2 * 3 = 6
7 * 2 = 14
Total = 147
147 - 97 = 50 - 97 = - 47
As the negative number (- 47) is the same as the last two digits of the VAT
number, the number is valid.
Some Basic VAT Do’s and Don’ts
- DO keep a 12-month ‘rolling’ turnover record if not yet VAT registered -
late registration can result in a penalty of up to 15% of the net tax
- DO retain business records for the last six years - these could be
demanded by law
- DO notify your local HM Revenue & Customs office whenever major changes
take place - changes must be notified within 30 days
- DO obtain and keep all VAT invoices for purchases - these are your
authority to claim back the VAT on supplies made to you
- DO charge VAT on supplies to your staff (except for food, drink and
accommodation provided free to catering & hotel employees)
- DO charge VAT on any equipment or vehicles you sell or part-exchange
(except motor cars, which have their own particular rules)
- DO account for VAT on fuel used for private motoring using the appropriate
CO2-based fuel scale charge
- DON’T charge VAT on the transfer of a business as a going concern if the
conditions have been met (but DO make sure contracts incorporate the
appropriate VAT provisions)
- DON’T claim the VAT on the purchase of a motor car - it will not be
recoverable except in some very special circumstances
- DON’T claim the VAT on goods or services used for private purposes. Where
there is an element of private use (e.g. mobile phone) an appropriate
percentage should be claimed.
- DON’T claim the VAT on entertaining clients and prospective clients,
including that on the staff doing the entertaining (but DO claim the VAT paid
on entertaining your staff, such as a summer barbecue or Christmas party)
- DON’T forget to account for VAT on intercompany charges (unless within a
VAT group registration)
Andrew Needham is a Director of VAT Specialists Limited,
headed by Chartered Tax Adviser Andrew Needham who has a degree in Law from UCNW
Bangor and is a specialist in indirect taxes. Andrew has over 20 years
experience in VAT having spent 7 years in HM Customs & Excise, firstly as a VAT
inspector, then as a departmental trainer, and finally in a headquarters policy
unit dealing with the introduction of the EU single market.
VAT Specialists Limited, 31 Bisham Park, Runcorn, Cheshire WA7 1XH - T)01928
571207 F) 01928 571202 Mob ) 07810 433 926
(E) Andrew Needham BA CTA
(T) 01928 571207
(F) 01928 571202
(M) 07810 433 926
(W) www.vatspecialists.net
