What is Value Added Tax (VAT)?
VAT stands for value added tax. It is a 20% sales tax levied on most goods & services except postage stamps, financial transactions and property transactions. It is a tax charged by the seller to consumers and businesses that other VAT registered businesses can reclaim from HMRC.
VAT Registration Numbers
A VAT registered number is a unique number issued to businesses that are registered to pay VAT. Businesses can find their VAT registered number on the VAT registration certificate issued by HMRC.
Search for UK and EU VAT Numbers
There is a couple of websites where you can find company VAT Numbers –
What is a VAT Number?
UK VAT numbers are 9 digits long, with the first two letters indicating the country code of the registered business. For example, for Great Britain (UK), the first two digits of the VAT code are GB. EU (European Union) VAT numbers consist of 15 digits long alphanumeric characters, with the first two letters indicating the country of the registered business. For example, for Denmark, the first two digits of the VAT code are DK. All the countries in the EU with the two letter country codes are:
- AT – Austria – 9 characters always starting with a U.
- BE – Belgium – 10 characters (9 prior to April 2005).
- BG – Bulgaria – 9 or 10 characters.
- CY – Cyprus – 9 characters – last character always a letter.
- CZ – Czech Republic – 8, 9 or 10 characters.
- DE – Germany – 9 characters.
- DK – Denmark – 8 characters.
- EE – Estonia – 9 characters.
- EL – Greece – 9 characters.
- ES – Spain – 9 characters.
- FI – Finland – 8 characters.
- FR – France – 11 characters.
- GB – United Kingdom.
- HU – Hungary – 8 characters.
- IE – Ireland – 8 characters.
- IT – Italy – 11 characters.
- LT – Lithuania – 9 or 12 characters.
- LU – Luxembourg – 8 characters.
- LV – Latvia – 11 characters.
- MT – Malta – 8 characters.
- NL – The Netherlands – 12 characters with the 10th character always a B.
- PL – Poland – 10 characters.
- PT – Portugal – 9 characters.
- RO – Romania – between 2 and 12 characters.
- SE – Sweden – 12 characters.
- SI – Slovenia – 8 characters.
- SK – Slovakia – 10 characters.
How to check if a UK VAT Number is correct?
A UK VAT number is not a random set of numbers and there is a formula that allows you to identify whether the VAT number is valid or not. If the VAT number is not valid, then a business cannot reclaim the VAT from purchases made.
Following steps should be undertaken to identify whether the VAT number is correct or not –
- List the VAT number vertically excluding the first two letters (i.e. country code).
- Then multiply each value of VAT registered number starting with 8 and ending with 2.
- Add up all the values obtained after multiplying each value of VAT number.
- Finally, deduct 97 from the total sum until the answer becomes negative. The negative value obtained must match the last 2 digits of the VAT number. If the negative value does not match with the last 2 digits, the VAT number is considered as invalid.
For example – VAT number for Deutsche bank AG London is GB 243609761
- 2 x 8 = 16
- 4 x 7 = 28
- 3 x 6 = 18
- 6 x 5 = 30
- 0 x 4 = 00
- 9 x 3 = 27
- 7 x 2 = 14
The total of the above calculation is 16+28+18+30+00+27+14=133
Subtract 97 until the figure becomes negative and the result is 133-97-97=-61 which is matching the last two digits of the VAT number. It means the VAT number is valid.
Why it is important to check the VAT registration number?
If you have just started dealing with a new customer or a supplier and you want to check whether the VAT registration number provided by them is valid or not, you can do so by the following two ways –
- Call HMRC VAT helpline – You can call the HMRC VAT helpline number on 03002003700 between 8 am to 6 pm during the week. You can only check the VAT number for UK registered businesses.
- Use the online VAT information exchange system (VIES) – With the help of the VAT information exchange system (VIES), you can check the validity of a VAT registered number for any business registered in the European Union (EU). The VIES service was established to oppose the growing threat of fraud.You can also validate a VAT number by accessing the European commission VIES website. You must simply select the country where the business is situated and then enter the registration number you want to check. The website will show you whether the number is valid or not. If it is valid, the VIES website will confirm it and share the name & registered office of the business.
Keep a Copy of Your Search
After checking the validity of the VAT number, you should save or print out the results of the search. If you asked any questions by HMRC in the future, you can display the proof that the number was valid at the time of your search.
What to do if VAT registration Number is not valid?
If VIES website shows the VAT number is invalid, you must contact your customer or supplier to crosscheck whether the VAT number provided by them is right or wrong. If cross checking the VAT number twice, still shows the same result i.e. invalid VAT number, you should inform them that the VIES system is reporting the number as invalid. In this case, the company will contact HMRC to ask whether the VAT number inputted in the VAT information exchange system is correct or not.
How to Reclaim VAT?
You can only reclaim VAT, if you have a valid VAT invoice from a supplier. A valid VAT invoice must include the following –
- A unique invoice number
- Business name & address
- VAT registration number
- Description of the goods & services
- The date
All these details must be mentioned on the invoice before you try to reclaim the VAT. You must ensure the VAT number is valid when you are reclaiming a large amount of VAT. If you don’t follow HMRC rules, HMRC can refuse your request to reclaim the VAT.