You’re probably reading this blog wondering why on earth HMRC are taking so long to send your VAT registration number. You’re not alone! It’s a problem that frustrates a lot of business owners. Recently HMRC have been much slower than they used to be. Unfortunately, HMRC have little sympathy if you haven’t factored in the wait time – even if you had a much longer wait than expected. Panic not! While there isn’t much you can do to speed up the process, there are steps you can take to help your business while you wait, so you’re well-equipped for when you start paying VAT.
Collect VAT from your planned VAT registration date
We can’t overstate the importance of this first point! As early as possible, keep VAT money aside because you will, at some point, have to pay it back to HMRC. We recommend creating a savings account where you can at least earn interest on the cash you put aside.
Adjust your prices to account for VAT
If you’re a service-based business:
If you primarily deal in services, you’ll need to start charging VAT from your VAT registration date. While you’re waiting for your VAT registration number to come through, you can add on the value of the VAT to your prices, but do not bill it as VAT – otherwise, it’s classed as VAT fraud! Instead, add the extra charge to the invoice with a note that says something like “additional amount pending VAT registration”.
Example:
You invoice £10,000 to a client for your firm’s marketing services. Then, add what the VAT would be (£2,000) with a note detailing that it’s for your pending VAT registration.
Then, when you receive your VAT registration number, you’ll need to reissue the invoice with that number and detailing VAT split. The client will then be able to reclaim the VAT on their VAT return.
Alternatively, you’ll have to go back to your customers and bill them separately for the VAT once you’ve received your registration number. This method can certainly be tricky, as it relies on you having very understanding customers! If they refuse to pay the extra, you could end up out of pocket by having to pay the VAT back to HMRC yourself.
If you’re a product-based business:
Here’s where things get a little more complicated. If you’re a B2C business selling products to lots of different people, like items of clothing, it’s almost impossible to find each customer and ask them to pay VAT after the fact.
To counter this, you’ll need to carefully increase your prices at the right time while you’re waiting for your VAT registration number. Again, make sure you don’t issue it as a VAT invoice or you could get in trouble (plus, if you’re selling to consumers they wouldn’t reclaim the VAT anyway).
This means you just need to raise your prices with the expectation of reworking everything after you’ve received your VAT registration number. Once it comes through, you’ll need to calculate the VAT on each transaction and adjust your pricing accordingly.
Focus on overseas sales
If you’re selling via an online platform like Shopify, they sometimes don’t allow you to adjust your prices for pending VAT registration. It makes things very difficult, with business owners often having to go out of pocket while they wait for their VAT number.
One way to counteract this is by focusing on non-UK sales. Revenue generated by selling overseas doesn’t usually count towards your VAT threshold, so you don’t have to worry about collecting VAT on these sales.
Similarly, if you’re a business providing services overseas, you won’t need to account for VAT here. However, it’s still a good idea to voluntarily register for VAT as you might be able to benefit from reclaiming VAT on services you receive and materials you purchase for your business.
Take the stress out of VAT registration
Waiting for your registration number can take up precious time and energy. We’re here to help.
When we take care of your VAT registration, we deal with everything. If HMRC have questions or want documentation, we’ve got it covered. We chase them for you and do everything we can to expedite your registration. To get started, fill in our quick form here.
