Having an invalid VAT number amongst the documentation when the VAT-man investigates you can be a costly problem. However, there are ways to minimise this risk.
The two danger areas for invalid VAT numbers are:-
– suppliers pretending to be VAT registered; and
– exports to EU customers (if your client has them).
What’s the problem with suppliers? As an unregistered person is not able to issue a proper VAT invoice HMRC will not support your claim to recover input VAT on that invoice, so they may well ask for it back. The most face saving thing you can do is to check a sample of VAT numbers on an annual basis (not just new suppliers) and keep a note of this on file.
For new suppliers you should ring the VAT National Advice service (on 0845 0109 000) and ask if the supplier number is valid and belongs to the address given. Unfortunately HMRC won’t tell you any more than this. You should also check out the business address given on the invoice. It is now a legal requirement for any business to declare exactly where it trades from. And it’s best to check the phone number by using directory enquiries for the business name and address given.
Exports? You can only zero rate their sales of goods to VAT registered customers in member states providing you…
– obtain their customers VAT registration number and quote it in your sales invoices; and
– have commercial evidence that the goods have been removed from the UK within three months.
Sales to unregistered customers are subject to UK rates. When you ask for a valid VAT number you might not get an immediate answer from your export customers. If this is the case, you should always keep some form of documentation to satisfy HMRC but do ensure you follow this up to make sure you get the VAT number.
The above steps prove that you have done your best to establish the validity of VAT numbers given to you. You have acted in ‘good faith’ and your input claim should not therefore be overturned.