The Complete Guide to Company VAT Numbers

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VAT (Value Added Tax) is a consumption-based tax placed on certain goods and services. For many people, registering for VAT feels complicated and challenging. Still, it is a straightforward and manageable process that provides your business with a VAT number you can use to manage your VAT payments and charges.

Your VAT number is essentially your unique business identifier. It is used on your invoices when you charge VAT and on your paperwork when you submit your VAT returns. When you first register for VAT and start working with your VAT number, the processes and rules can seem daunting. There’s a lot to know and learn, which makes VAT feel intimidating. Fortunately, there is technology available to assist you in understanding and managing your VAT numbers.

Blue dot’s team comprises tax specialists who understand VAT and its implications. These expertise are embedded into our AI-led expense analysis platform, which is designed to simplify VAT and tax management across all areas of your business. We can help you optimise and manage your VAT.

Why Your Business Needs a VAT Number

Legal Requirements and Compliance

Your VAT number, also known as a VAT Registration Number (VRN), identifies you as a business. Nobody else has the same combination of numbers and letters to ensure that your VAT returns and information are not mixed up with another company. The goal of your VRN is to:

• Identify you as a VAT-registered business
• Ensure your VAT charges are allocated to the correct business
• Ensure your VAT is given to the right company in a VAT return
• Let HMRC confirm that you’ve fulfilled your VAT requirements and reporting
• You need a VRN if you are VAT-registered. This legal requirement must be addressed, especially if you earn over the VAT threshold.
• Keep you compliant when you exceed the VAT threshold, which is currently set at a taxable turnover of more than £85,000. If you exceed this threshold in your annual billing and don’t register for VAT, then you may be liable for a fine from the tax authority.
• Your VAT number is essential for your VAT returns to ensure you submit them correctly. With the wrong number, you could be liable for a fine.

Benefits for International Trade

When it comes to cross-border transactions, every country has a VAT Identification Number (VAT ID) that you will need to use when you do business with these countries. If you provide goods and services in another country, then your VAT is allocated by that country. There are also clear rules around doing business with Northern Ireland and the European Union that you need to abide by to ensure you are compliant when you deal with international trading.

Your VRN allows the tax authorities in different countries to keep track of the goods and services you provide across borders. 

Obtaining Your Company VAT Number

Step-by-Step Application Process

Applying for your VAT number isn’t complicated, but you do need to follow a set of steps to get from point A (no VAT number) to point B (your own unique VAT number).

• Register online with HMRC. To do so, you’ll need your Government Gateway User ID and Password, so if you don’t have these, you will need to create a new sign-in as a new user. If you have forgotten or lost your password and ID, you can follow these helpful online directions to get you back on track. If you do not want to register online, you can register for VAT by post.

• Prepare your paperwork. You will have paperwork showing your turnover, your business type, your bank account details, your Unique Tax Reference (UTR) number, and your company registration number. You will also need your Pay As You Earn (PAYE) paperwork, corporation tax, and self-assessment paperwork. To prove your identity, you will need your date of birth, National Insurance (NI) number, a valid ID such as a passport or driving license, and your personal bank account details. Plus, you will need payslips, P60s, and your self-assessment returns.

• Set up a valid and approved VAT accounting system compatible with HMRC’s system. HMRC has a comprehensive list of approved providers you can choose from.

• Once you have logged in, follow the step-by-step instructions online. You have the paperwork and the information HMRC needs, so just input the information as you move through the process. Once you’ve completed the registration documents, you will be notified when you can expect to receive your VAT number and your login details for the VAT online portal.

• Some extra notes! While you’re registering for VAT, you will be asked to choose a specific VAT accounting scheme, as this is how HMRC will calculate the amount of VAT you owe or how much they need to refund to your business. You also need to check for any exemption schemes you may be eligible for because these would require you to register for VAT by post using a VAT1 form.

Once you’ve completed these steps, HMRC will then send you a VAT Certificate of Registration along with all your paperwork and documentation within approximately 30 days from the date you applied.

Tips for a Smooth Application

If you want your VAT Number application to go super smoothly, follow these key tips:

When registering for VAT, know which VAT accounting scheme you want to use as this will determine how HMRC calculates the amount of VAT you owe and how much they need to refund your business.

There are four VAT accounting schemes: 

• Annual VAT lets you submit a VAT return annually

• Flat-rate VAT allows you to pay a percentage of your turnover

• Cash Accounting is built on the basis that you paid VAT on cash transactions

• Standard VAT is a monthly VAT return submission, with VAT payments every three months

Use the information included on your VAT certificate and in your HMRC VAT paperwork pack to log into your VAT portal early on. This will allow you to catch any problems quickly and resolve them before you run the risk of fines.

Keep meticulous records to ensure your VAT is always current and timely. It can be tedious and time-consuming, but if you take the time to have your paperwork in order, you will thank yourself come VAT return time.

Use smart tools and technologies to enhance your VAT reporting, management, returns, and admin. These make life a lot easier as they simplify and streamline complex processes.

Managing Your VAT Number

When you start using your VAT number, make sure it has been entered correctly into your VAT accounting software so it is reflected on all your invoices. You must ensure that your VAT number is visible on all documentation to ensure you are compliant. 

Your VAT invoice reflects the amount of VAT added to the final cost to the customer. It is compulsory for you to issue a VAT invoice now because you are registered for VAT. Your VAT invoice must include your address and other business information alongside your VAT number. We have a detailed VAT invoice walkthrough right here to help you navigate your first invoice and set up your accounting systems for VAT. 

Common Mistakes to Avoid with VAT Numbers

There are several common mistakes people make when it comes to VAT:

• You didn’t register your business for VAT within 30 days of exceeding the annual turnover threshold
• You do not have a valid VAT invoice and you are claiming for VAT
• You are not applying the right rules to VAT claims and returns – these are tricky, and navigating them correctly is essential
• Claiming VAT on business entertainment or claiming VAT on fuel or vehicle expenses that were for personal use
• Not charging VAT on non-standard supplies such as property income
• Claiming VAT on zero-rated purchases

You can avoid these mistakes (and many others) by using advanced and comprehensive solutions designed to simplify your VAT processes. Blue dot’s VATbox solution identifies and calculates any eligible and qualified VAT spend across multiple countries and legislations. You take advantage of its AI and NLP models to automatically analyse all within your T&E invoices and receipts and gain a contextual level understanding our your VAT processes. This enables enterprises to optimise VAT management processes end-to-end, enabling them to maximise returns and operational efficiencies while simplifying cross-border compliance and minimising audit risks. 

FAQs About Company VAT Numbers

What is the VAT limit?

You must register for VAT and get a VAT number when your turnover exceeds £85,000 per annum.

What is my responsibility as a company with a VAT number?

You must ensure you file your returns on time, pay on time, enter the correct amounts, include VAT on all your invoices, keep accurate records, and use the correct software to file your returns with HMRC.

Why are VAT invoices important?

They show your VAT number clearly so you can charge VAT, and you can use them to keep accurate records of the amount of VAT you’ve charged. You can also use them to track what you’ve been paid so you can set aside VAT amounts in a separate account.

How Blue dot Can Help

Blue dot can help you streamline and digitalise your company’s VAT process through its AI-driven and centralised expense analysis platform. Our VATbox solution has saved companies millions in reclaimable VAT and allows you to customise the taxation rules to suit your business goals. We have also developed extensive guides to help you through the VAT process, including registering for VAT, changing from VAT Flat Rate to Standard, and managing your VAT payments. Plus, we also have a VAT calculator which helps you work out your VAT in a few, quick clicks.