Why should a business check a VAT number of their customer

 

A business should always check a UK business VAT number for all their new customers who provide their VAT number on their invoices. This VAT number check should also be done on a regular basis to make sure any of these customers have not deregistered from VAT at some point.

If the VAT number provided by your customer on their invoice is not valid, HMRC will not allow to reclaim the VAT back on that invoice in the VAT returns. Invalid VAT number provided by your customer could be because of a typo error or they might have not removed it from their invoice after they have deregistered from VAT or they are trying to falsely charge VAT when they are not allowed to do so.

How to verify a UK VAT number before Brexit

European Commission runs a website - VAT Information Exchange System (VIES) which has a search engine which will let you check a VAT number of any business in a EU country.

VIES (VAT Information Exchange System) is a search engine (not a database) owned by the European Commission. The data is retrieved from national VAT databases when a search is made from the VIES tool. The search result that is displayed within the VIES tool can be in one of two ways; EU VAT information exists (valid) or it doesn't exist (invalid).

How to verify a UK VAT number after Brexit

AccountsDesk accounting software uses HMRC API to provide the same service as VAT Information Exchange System (VIES). This service works only for UK business VAT numbers. You can check a UK VAT number using their VAT checking service. The service also generates the token similar to VIES which can be used as proof that a VAT check has been done by a business.

Keeping proof of VAT number validity search for each customer is considered a good accounting practice. The AccountsDesk VAT checking service has the option to generate a verification token which you can produce to HMRC if needed as a proof that a given customer is registered for VAT registered at the time of the transaction.

What if the VAT number is invalid

If the system returns an invalid status it means that the VAT number you are trying to validate is not registered with HMRC. f a VAT number is shown as invalid, in the first instance check with the customer that the number quoted on their invoice is correct. Many times if a business creates invoices manually, there could be human errors which could result in invalid VAT number. If the customer confirms the VAT number is correct and if you still get it as invalid through the VAT verification service, you should ask the business to contact HMRC and get their data updated on the HMRC systems.

If for any reason, the customer be unable to provide a valid VAT number, and you still need to continue with the transaction, ask for the reason it in writing and make sure their reason sounds good. If they still do not provide a good enough response, you should report the fraud to HMRC without delay.

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