What is a VAT Number and How Do You Get One?

In countries with a VAT system to tax end users as consumers of goods and services sold, businesses (including B2B companies) need an identifying VAT number. A VAT number is also called a VAT ID or VAT registration number. 

VAT-registered businesses add VAT amounts to their sales and service invoices while providing their assigned VAT number to their customers. These companies or sole traders in business also collect or find and check each supplier’s VAT number to reclaim VAT paid on purchases, reducing the amount of VAT due to the government.  

The UK VAT system includes imported goods from businesses not based in the UK. Therefore, businesses in other countries exporting into the UK also need to register for a VAT number. VAT on digital services provided to UK consumers should also be charged by businesses providing those services, either within the UK or from another country. 

This article focuses on the United Kingdom government’s VAT system. You’ll receive guidance about 

• When your business needs a VAT number for tax compliance
• How to obtain a VAT number 
• How to find companies’ VAT numbers and check their UK VAT number 
• How to read a VAT number 
• Consequences of not getting a required VAT number 

What is a Value Added Tax (VAT) Number?

A value added tax (VAT) number is an assigned tax identification number issued to each business completing registration for a VAT number that will be used on invoices, for computing VAT taxes, and for filing VAT returns. 

In the UK, sellers use a unique VAT number to invoice customers for VAT taxes that are collected and will later be paid to the government at an amount reduced by VAT they pay to suppliers on purchases. In contrast, EU VAT in current European Union member states may be invoiced but not collected from buyers under the reverse charge system, where buyers pay the government directly for VAT owed. 

How to Know if You Need a VAT Number

A VAT number may be required by a VAT system country’s government when selling goods or services within that country or shipping business-supplied items to the country as imports. 

To discover whether your business needs a VAT number, go to an online government VAT registration site and read VAT regulations issued by the government assessing VAT taxes. 

UK Rules for VAT Numbers

For the UK, HMRC (HM Revenue and Customs) has issued a  Who should register for VAT (VAT Notice 700/1) and VAT guide (VAT Notice 700), which are available on the official UK government website. 

The UK government’s Register for VAT page includes rules for which businesses need a VAT number (and when), which they can obtain through registration. 

According to the UK government, you are required to register for a VAT number within 30 days from the end of the month that your business meets specified VAT taxable turnover thresholds (for sales and services):

• “your total VAT taxable turnover for the last 12 months was over £90,000 (the VAT threshold)
• you expect your turnover to go over £90,000 in the next 30 days.”

The VAT taxable turnover amount may be revised at times by the UK government. Therefore, check the gov.uk website’s Register for VAT page for the latest threshold amount. 

The effective date of registration for VAT is the first day of the second month after exceeding the VAT taxable turnover threshold. Once the HMRC registers your VAT number, you must pay any VAT that you owe. Starting with the effective date of VAT number registration, you can charge VAT on sales invoices and reclaim VAT for purchases. 

Under voluntary registration, your business can register for a VAT number even if it doesn’t meet the £90,000 VAT threshold that requires one. 

Non-established taxable persons (NETPs) must also register for a VAT number in the UK, regardless of their VAT taxable turnover level, if:

• “you’re based outside the UK
• your business is based outside the UK
• you supply any goods or services to the UK (or expect to in the next 30 days).”

How Do You Obtain a VAT Number?

Your business can register to obtain a VAT number by submitting a form online through the UK government’s website page unless it meets an exception or condition that requires registering by post (mail). Your business also needs to provide the required documentation to get a VAT registration number. 

Documentation for a VAT Registration Number

Documentation required to obtain a VAT registration number depends on the legal form of the business: limited company, partnership, or individual. A sole trader is a self-employed individual. According to the UK Government website’s Register for VAT page:

“Register a limited company

You’ll need:

• your company registration number
• your business’s bank account details
• your Unique Taxpayer Reference (UTR)
• details of your annual turnover

You will also need information about:

• your Self Assessment
• your Corporation Tax
• Pay As You Earn (PAYE)

Register as an individual or as a partnership

You’ll need:

• your National Insurance number
• an identity document, like a passport or driving licence
• your bank account details
• your Unique Taxpayer Reference (UTR), if you have one
• details of your annual turnover

You will also need information about:

• your Self Assessment return
• payslips
• P60”

Applying for a VAT Number by Post 

The UK government requires that you obtain a VAT number by postal registration with paper form VAT1 (instead of registering online) when:

• “you want to apply for a ‘registration exception’
• you’re joining the Agricultural Flat Rate Scheme
• you’re registering the divisions or business units of a body corporate under separate VAT numbers

The UK government’s VAT number rules require registration by post with different VAT registration forms in these circumstances:

• form VAT1A if you’re an EU business ‘distance selling’ to Northern Ireland
• form VAT1B if you import (‘acquire’) goods into Northern Ireland worth more than £90,000 from an EU country
• form VAT1C if you’re disposing of assets and you have claimed Directive refunds on them”

After Applying for a VAT Registration Number

When applying for a VAT registration number, you may need to be patient during what could be a lengthy HMRC investigation process that may take up to two or three months to complete before the VAT number is issued. Use this link to check when you can expect a reply from HMRC about VAT. You may discover that your VAT registration number is issued much sooner, within a few weeks. 

After you’ve registered for a VAT number with the HMRC, you’ll receive a notification by post to log in to the Government Gateway to sign up for an online VAT account with the “VAT submit returns” option. You will sign up for this online VAT account even if your business is using an agent for handling VAT. 

Because you can’t include VAT on your invoices before you get your VAT registration number on a VAT registration certificate, the UK Government suggests that you increase your prices by an amount that would cover the VAT amount you’ll need to pay HMRC. Don’t invoice for VAT before getting a VAT number in the UK because If you invoice before getting a VAT number, you could be liable for a penalty of as much as 100% of the amounts invoiced. 

Transfer Your UK VAT Registration and Register for VAT Upon a Change of Ownership or Legal Status

In the UK, you can transfer VAT registration to keep the same VAT number for a business that your company acquires as a takeover or if your business has a legal change of status such as changing from a partnership to a sole trader and wants to retain its VAT number. 

To transfer your VAT registration to buy a business or change its legal status, fill out form VAT 68, send it to HMRC by post, wait for HMRC to confirm your transfer within about three weeks, and then register for VAT. In the case of buying a business, both buyer and seller must separately submit form VAT 68. 

According to the gov.uk Transfer your VAT registration page: 

“If you’re buying a business:

• contact HMRC within 21 days of the transfer application if you want to keep the seller’s accountant
• replace any self-billing arrangements with new ones
• set up new direct debits on your VAT online account.”

On the other side of the deal, if you sell your business, you need to end your accountant’s (agent’s) access to your online VAT account, cancel any direct debits on your online VAT account, and give the buyer your records if you are transferring the VAT registration number to the business buying your company. 

VAT vs VRN vs UTR Numbers

In comparing VAT vs VRN vs UTR numbers in the UK, VAT (value added tax) number and VRN (VAT registration number) both mean an HMRC-issued registration number for value added tax. A UTR (unique taxpayer reference) is a different 10-digit number issued by HMRC when registering for a Self Assessment income tax return or setting up a limited company. 

How to Check for a Business’s VAT Number

You can use the UK VAT checker (HMRC VAT checker) or phone the HMRC VAT Helpline to find and verify the VAT number for a business registered for VAT in the UK. The VAT Checker UK also provides proof for UK VAT-registered companies (which provide their own VAT number when they check VAT numbers in the UK) that they have completed a VAT registration number verification search on another business. 

This UK VAT checker will let you know if a UK VAT registration number is a valid VAT number and provide the name and address of the business to which the VAT number is registered. 

In the EU, you’ll use VIES (VAT Information Exchange System) instead to check a business VAT number. 

For efficiency, instead of using time-consuming manual data entry or phoning to find and check the VAT numbers of other businesses, your business can automate its supplier VAT ID validation for tax compliance with AP automation and global payments software from Tipalti. 

Tipalti AP automation software, used for domestic and international accounts payable invoice processing, collects and validates VAT IDs (for 49 countries) received through self-service supplier onboarding and matches VAT numbers on supplier invoices with the VAT IDs provided by suppliers. Tipalti global payments software also collects and verifies VAT IDs for tax compliance when making electronic payments in European countries, including SEPA. 

Tipalti finance automation software automates global regulatory compliance, including checks against OFAC sanctions lists and AML for anti-money laundering, to prevent penalties before making global payments. Tipalti offers Procurement software that works seamlessly with its unified finance automation platform. Tipalti automation software integrates with your ERP system or accounting software. 

How to Read a VAT Number

In the UK, A VAT number begins with a two-digit alphabetical country code for the country assessing the VAT, followed by 9 numerical digits without a hyphen. 

In the UK, for England, Scotland, and Wales, the VAT number begins with GB for Great Britain. In Northern Ireland, the VAT number prefix is XI. Suppliers based in the EU or another VAT-assessing country will use their country’s unique format instead.

What Happens if You Fail to Obtain a VAT Number?

If you fail to obtain a VAT number, it depends on which country, the circumstances, how late you are in registering to get a VAT number, or if you invoice for VAT early before obtaining a VAT number. 

VAT and Non-VAT Countries

All European countries, including the UK and EU, require VAT numbers, but the United States has a sales tax system imposed by each state instead of a VAT consumption tax. Some countries outside Europe also have VAT tax systems. When your non-UK business sells into a VAT country like the UK as an exporter, you may need to register for a VAT number. 

Late VAT Registration Penalties and VAT Payments Due HRMC

If you are required to get a VAT number in the UK but haven’t registered for VAT, your business will be fined penalties as a percentage of VAT due, depending on the range of days late and the amount of VAT due HMRC. It will still need to pay VAT taxes owed to the HRMC, even if VAT is not invoiced and collected from customers. 

In the UK, for up to 9 months late to register for VAT, the penalty is 5% of VAT due; for over 9 months to 18 months, the penalty is 10% of VAT due; for over 18 months late, the penalty is 15% of VAT due.  

UK VAT penalties and VAT amounts due can be high because VAT rates vary from the standard 20% to a reduced 5% for home energy and certain reduced-rate goods and services like children’s car seats. (VAT is a zero rate for certain types of goods and services, like most food and children’s clothes.)

Exempt Businesses Not Needing a VAT Registration Number

In the UK, selling businesses generally need a VAT registration number. But businesses that only sell goods or services in categories exempt from VAT can’t get a VAT registration number and can’t reclaim VAT on their purchases or expenses. 

Types of goods and services exempt from VAT in the UK include:

• “insurance, finance and credit
• education and training
• fundraising events by charities
• subscriptions to membership organisations
• selling, leasing and letting of commercial land and buildings — this exemption can be waived”

Penalties for Invoicing VAT Before Getting a VAT Registration Number

In the UK, your business could be fined up to 100% of the amounts invoiced for VAT as a penalty if it invoices customers before getting a required VAT registration number, according to the Finance Act of 2008.

Customers without a VAT Number

Customers, as consumers, who don’t obtain a VAT number will be invoiced for VAT that is payable, but will not be able to reclaim VAT taxes on their own purchases from suppliers. 

Summing It Up 

The VAT system for business trade taxation is used throughout Europe, including the UK, and many other countries. Companies selling goods within or imported to a VAT country must register for a VAT number when they meet the conditions for VAT registration. The VAT procedure includes invoicing customers for VAT after getting a VAT registration number, reclaiming VAT paid on purchases, and remitting VAT amounts due to the government in an amount reduced by the offset for reclaimed VAT. 

In current EU member states (countries), businesses in B2B transactions (not B2C) may be able to create a VAT invoice for amounts due for tax purposes without collecting the money for VAT under the reverse charge VAT method. The reverse charge process makes buyers responsible for paying the VAT directly to the assessing government, without the seller acting as a middleman in the VAT collection process. In the UK, only Northern Ireland businesses selling into the EU may be eligible to use reverse charge. 

To reclaim VAT on amounts paid, purchasers need a valid invoice with a verified VAT number for  HRMC to allow instead of rejecting the VAT reclaim amount. That means proper verification of VAT ID numbers from suppliers is essential. To efficiently and accurately collect and check each supplier’s VAT number with Tipalti  AP automation software, explore more about UK VAT tax compliance.