Registering for VAT isn’t a requirement for starting or operating a business. In fact, a business only needs to register for VAT if its taxable turnover in the previous 12 months hits the registration threshold. But what happens to invoices when a business does become VAT registered?
When is a business required to register for VAT?
The VAT registration threshold is £85,000. If a business has a taxable turnover higher than the threshold over the last 12 months, or expects to reach it within the next 30 days, it’s time to register.
It is also worth noting that for some businesses it’s beneficial to register for VAT on a voluntarily basis, even if turnover is lower than the threshold. Our article about voluntary VAT registration explains the reasons for this in more detail.
Sending invoices with VAT
When a business registers for VAT, it’s assigned a unique VAT number to help HMRC identify it correctly. Once the VAT number is issued, it must be used on all invoices that the business sends to its customers.
It’s also important that the invoice shows any VAT once the business registers, but it can only include the VAT if it also has the VAT number. The consideration some businesses face is that when a business registers for VAT, the VAT number isn’t issued immediately and can sometimes take a couple of weeks to arrive.
Invoicing whilst waiting for your VAT number
Fortunately a business can still send an invoice whilst waiting for the VAT number, so normal business operations don’t need to go on hold during the wait.
Because the business is VAT registered, it still needs to account for any VAT on its sales, but can’t show this on the invoice without a VAT number. This means that VAT registered businesses which are waiting for their number to arrive can still issue the invoice, but without the VAT element included. To account for the VAT that should be included, the invoice must show that VAT is pending, so be sure to remind customers that there will be a follow-up invoice.
Once you have been issued with your VAT number, you will need to send out a secondary invoice, this time with the additional VAT amount included, as well as showing your VAT number.
We know that VAT is a complex area, so it’s always wise to speak to your accountant about any concerns.