COVID-19 has caused businesses to experience long delays when getting a VAT number after submitting the registration form. This year, HMRC acknowledged the delays and asked companies to be patient while the backlog was worked through. However, a new business to VAT may be confused about what they need to do in the interim.
If a business is registering because it passed the twelve-month turnover threshold, it must start charging VAT from the first day of the second month after exceeding that threshold.
An alternative would be to wait until the VAT number is received. However, this could cause cash flow problems as some businesses have endured delays of up to four months.
A second option would be to invoice the total amount and not show the VAT as a separate line on the invoice. If this is chosen, the total, including the VAT, should be shown as a single amount. It should also be made clear that a VAT invoice will be issued once the VAT number is received. The problem is that where the customer is also VAT registered, they may be reluctant to accept an invoice that is not a valid VAT invoice as they will be unable to reclaim the input tax.
The business could also invoice for the net amount and then send the VAT-only invoice later on once the number has been issued. Companies should discuss this upfront with customers to avoid any conflict.
