Enter Your E-mail

VAT Voice by Andrew Needham

Andrew Needham, Director of VAT Solutions (UK) Ltd, explains how to verify an EU VAT number, and looks at how to cope with VAT in the EU.

How to verify an EU VAT number

Background

When you sell goods to a customer in another EU member state, one of the requirements in order to zero-rate the supply is to obtain the customer’s VAT registration number and quote it on your sales invoice.

You are responsible for ensuring that the VAT number is a valid one. If the VAT number is not valid, and Customs do not think you have “taken reasonable steps” to verify it, they will assess you for the VAT due.

How to verify the VAT number

There are two ways in which to check the authenticity of an EU VAT registration number.

Firstly you can access the European Commission database on the internet at http://europa.eu.int/comm/taxation_customs/databases/vies_en.htm and put in the VAT number you wish to check. This will tell you if the number is a valid one. It will not, however, tell you who it belongs to. If you have the misfortune to be dealing with a dodgy customer that is not VAT registered, but does not want to be charged VAT, he could simply quote the VAT number from his local corner shop and you would be none the wiser.

Alternatively you can contact Customs National Advice Service on 08450 109000 and ask them to verify the number for you. They have access to a European-wide database known as VIES (VAT Information and Exchange System) which gives details of all VAT registered business throughout Europe by accessing the member states databases.

When you ring Customs, they will ask for your VAT number. This is only so that he has a record of your query if you later need to verify that you have made the check. If you ask for one, they will also give you a unique reference number for the query for you to keep in your records. Next, they will ask for the country and VAT number of the customer that you wish to check. They will then be able to confirm the name and address of the customer, or tell you that it is an invalid number. Because the system relies on a system of interfaces between national computer systems, they can sometime “go down” or become overloaded. If this is the case, just ring back again later.

Coping with a bigger EU

As most people will be aware, the EU got a lot bigger on 1 May 2004 with the addition of ten new Member States.

From your point of view, what does this mean for VAT accounting, and what do you need to know about the new Member States?

VAT rates

The first thing you will need to know is the identity of those countries, and what their VAT rules are. The ten new Member States and their standard VAT rates are: Cyprus (15%), the Czech Republic (19%), Estonia (18%), Hungary (25%), Latvia (18%), Lithuania (18%), Malta (18%), Poland (22%), Slovakia (19%) and Slovenia (20%).

All the new Member States will have VAT systems that are governed by the EC 6th Directive, but as we already now from the existing fifteen Member States, the way the 6th Directive is interpreted across the EU can vary widely, so never assume anything is the same as in the UK!

Supplies

Anybody supplying goods to customers in the new Member States will no longer have to obtain full export evidence to zero-rate the supply of goods. You can zero-rate your sales to VAT registered customers in the new Member States, provided you quote their VAT registration number on your sales invoices, and have commercial documentary evidence that the goods have been removed from the UK within three months. Sales to unregistered customers in the new Member States will be subject to UK VAT.

Also remember that if you hold stocks of goods in the new Member States for supply to local customers, this may mean that you are required to register for VAT in that Member State.

You must also remember to include these sales on your EC Sales Lists and Intrastat returns. If you are not currently required to submit Intrastat SSDs, don’t forget to include your sales to the new Member States when calculating if you are required to do so. The current threshold is £221,000 per calendar year, and Customs estimate that an extra 1,000 businesses will need to send these returns as a result of the EU enlargement. These thresholds also apply to purchases from the EU.

The accession of the new Member States will cause confusion for UK companies, but much more so for companies in the new Member States, so make sure you ask them for their VAT registration number, as they are unlikely to supply it to you automatically.

Purchases

If you purchase goods from the new Member States, these will no longer be treated as imports, so you may be able to reduce your Duty Deferment guarantee and save on bank charges. However, don’t forget to account for and reclaim acquisition tax on any goods purchased from suppliers in the new Member States. You do this by calculating VAT at 17.5% on the purchase price (in Sterling) and accounting for it in box 2 of your VAT return. However, you get to claim it all back in box 4 of the same return, so you will obtain a cashflow saving over the old system.

The current rules for supplying services will also apply to the new Member States, so remember that if you supply services such as training courses and conferences etc in the new Member States, you may be required to register for VAT there.

On the down side, if you go on holiday to any of these countries, you will no longer be able to get duty free. However, you will be able to purchase as much alcohol and cigarettes as you want, as long is they are for personal consumption!

Andrew Needham
Director, VAT Solutions (UK) Ltd
Email: andrewneedham@vatsolutions-uk.com

VAT Solutions (UK) Ltd
11 Winmarleigh Street,
Warrington,
WA1 1NB

(T) 01925 242497
(F) 01925 242498
(M) 07810 433927
(W) www.vatsolutions-uk.com

VAT Solutions (UK) Limited is an established independent firm of Chartered Tax Advisers, formed by Andrew Needham and Steve Allen. The company has a cross-section of clients from multi-national companies through to medium-sized and numerous smaller regional firms of accountants and solicitors. They produce a regular publication 'VAT Voice', which can be downloaded directly from the Internet via the following address: www.vatsolutions-uk.com/newsletter.doc