How to avoid errors when applying for VAT registration
At a recent meeting HMRC told the attendees that there were four common omissions that lead to applications for VAT registration to be delayed. Before I tell you about these omissions, so you know what to make sure you get right, let me just mention something else that HMRC told the meeting.
Apparently, some applications for VAT registration are being sent in on out of date application forms. These forms will be dated before November 2006. You can find the date on the printed form near the bottom. The latest forms are in the current green print with HMRC 11/06 in the bottom left of page one. Please make sure you are using the latest form. You can download a copy from HMRC’s website, and also find a copy of the guidance notes for the application form there too.
The omissions
The four omissions are:
- No telephone number;
- No turnover figure;
- Not filling the capacity in which signed box.
- Bank details
In the guidance notes that HMRC issue they make it clear that an applicant has to provide details of a UK bank account. Only businesses that are based abroad are likely be allowed to provide details for a foreign bank account. If you are in the process of setting up a bank account HMRC want to see evidence to support this.
The benefit of making sure that HMRC have up to date details of your business bank account is that repayments of VAT due to you will be paid directly into that account saving you the trouble of making a trip to the bank to pay in a cheque.
Telephone number
HMRC said that not putting a telephone number on the form is another common omission. HMRC doesn’t have any comment on providing a telephone number in the guidance notes. It would probably be wise to provide a land-line number, as HMRC can check that this exists and is allocated to the business, or in the case of sole traders is their number, even if it is a home phone rather than a business phone. Providing a mobile number is useful as this allows them to contact you should you be away from your office. HMRC contacted me on my mobile shortly after I had registered for VAT, so it is worth providing it.
Turnover figure
In boxes 19 through 21 it is necessary to provide details of your expected turnover in various categories. Yet again HMRC clearly think that the information on the form is clear as they provide no guidance on this point. So let me try to fill in the gaps:
Box 19: estimate of your expected taxable turnover in the next 12 months. This is what it says, an estimate. Taxable turnover is the turnover you expect to be charging VAT on at one of the so called positive rates, i.e. zero-rate, reduced-rate, or standard rate – currently 0%, 5% and 15% respectively.
It really does only require an estimate here. No one is going to hold you to it, but it would be a good idea to base it on any business plan figures you have, or on your expected growth in income in the coming 12 months.
Box 20: do you expect to make exempt supplies? It is important to know whether you will be making supplies that are exempt from VAT rather than zero-rated supplies. There is a big difference in impact on how much input VAT – the VAT you pay your suppliers – you might be able to get back. If you are going to be making exempt supplies you should seek help from a professional adviser as you may need a partial exemption method to help work out how much input tax you can recover.
Box 21: buying goods from and selling goods other EU member States. If you will be buying goods from other EU member states you need to put in the first box an estimate of the value of the purchases. In the second box an estimate of the value of your sales to customers in other EU member states.
This latter category must mean to business customers because sales to consumers will be subject to UK VAT at the appropriate rate, at least initially. I intend to ask HMRC for a comment on this because the lack of guidance on this part of the form must be causing difficulties for many applicants. I’ll let you know the outcome of my enquiry.
Capacity in which signed
Again there is no guidance on this point. It would probably be as well for the signatory to be one of the following, depending on the type of business:
- Sole proprietor;
- Partner;
- Director;
- Trustee;
- Company Secretary.
HMRC are unlikely to accept the form being signed by an employee or other agent.
One way around this is for the application for VAT registration to be made online.
Online applications
Using the online application system has one great benefit: it won’t let you submit the form until you have filled it in with data in a format that is acceptable. Doesn’t mean the data is necessarily correct, but it has to fit within the parameters set down by HMRC. Generally, an application submitted this way is likely to be dealt with quite quickly. I strongly recommend that you use this method of applying for VAT registration, rather than filling in and submitting the paper form.
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