How to account for VAT before your registration number has been issued

If you have registered for VAT, you may well have to wait a month, or more before your application has been processed, and you receive a VAT registration number. A commonly asked question by many business owners is how to account for VAT and issue invoices in the interim?

How long does it take to receive a VAT registration certificate?

Once you have registered for VAT, either online or using the paper form VAT1, HMRC states that you can expect to receive your VAT registration certificate, which contains your VAT number, in around one month from the date of submission. It expects to process 70% of applications within just 10 working days.

Unfortunately, over the past few years, there have been several instances where backlogs have caused significant delays in issuing VAT numbers, and several businesses we work with at Company Bug have waited many months before receiving a response from HMRC. Thankfully, most of the time, things do appear to run fairly smoothly.

How to account for VAT if you haven’t received your VAT registration number?

You must start accounting for VAT from the date you decided to register for VAT voluntarily, or the date from which you were obliged to register (due to your business turnover exceeding £85,000 during the previous 12 months – 2018/19 tax year threshold).

Make sure you keep records of all the invoices you have received since registering for VAT, as you will be able to reclaim any VAT your company has paid out to suppliers.

HMRC states that you should not charge VAT on any invoices you issue to clients or customer in the meantime.

Instead, businesses “should increase the amount they charge by the prevailing VAT rate (20%), explaining to clients and customers that you will reissue the invoices with the VAT-able amount once you receive your VAT number.”

Whether or not you’re in the position where you can issue invoices on this basis will depend on the relationship you have with your clients. If it is not easy to do so, you may decide to wait until you have your registration number and issue invoices a little later than usual.

More on limited company invoices and VAT registration for limited companies.