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Andrew Needham, Director of VAT Solutions (UK) Ltd, explains how to check VAT numbers and provides some VAT tips.  

Andrew Needham

Worried you’ve been given a dodgy VAT number?

It’s possible to make several checks on whether a VAT registration number shown on an invoice is valid. The validity of the number is important because the purchaser cannot recover VAT incorrectly charged by an unregistered trader, unless HMRC allows them to do so by concession.

The first thing you can do is an online check at the EC VIES website.  It can be found via the following link: http://ec.europa.eu/taxation_customs/vies/vieshome.do?selectedLanguage=EN.
 
However, this check will only tell you if it’s a real number, not who owns it.

If you want to check ownership details too, you should contact HMRC’s National Advice Service (0845 010 9000).  The number, name and address details you have can be given to HMRC, who will then confirm whether the details they have match with yours.  If different, they will not be able to divulge the details they have, but by that point, you will already know you have a problem!

If you don’t want to contact HMRC, or don’t have immediate access to the Internet in a given situation, you can do a manual check using the ‘modulus 97 check’, which works as follows:

1. The first seven digits of the VAT registration number are listed vertically.

2. Each digit is multiplied by a number, starting with 8 and decreasing to 2.

3. The sum of the multiplications is calculated.

4. 97 is then subtracted from the sum as many times as necessary to get to a negative number.

5. The negative number is the same as the last 2 digits of the VAT registration number if valid.

Example calculation

VAT registration number 339 0727 47

3 * 8 = 24
3 * 7 = 21
9 * 6 = 54
0 * 5 = 0
7 * 4 = 28
2 * 3 = 6
7 * 2 = 14
Total = 147

147 - 97 = 50 - 97 = - 47

As the negative number (- 47) is the same as the last two digits of the VAT number, the number is valid.

Some Basic VAT Do’s and Don’ts

• DO keep a 12-month ‘rolling’ turnover record if not yet VAT registered - late registration can result in a penalty of up to 15% of the net tax
• DO retain business records for the last six years - these could be demanded by law
• DO notify your local HM Revenue & Customs office whenever major changes take place - changes must be notified within 30 days
• DO obtain and keep all VAT invoices for purchases - these are your authority to claim back the VAT on supplies made to you
• DO charge VAT on supplies to your staff (except for food, drink and accommodation provided free to catering & hotel employees)
• DO charge VAT on any equipment or vehicles you sell or part-exchange (except motor cars, which have their own particular rules)
• DO account for VAT on fuel used for private motoring using the appropriate CO2-based fuel scale charge

• DON’T charge VAT on the transfer of a business as a going concern if the conditions have been met (but DO make sure contracts incorporate the appropriate VAT provisions)
• DON’T claim the VAT on the purchase of a motor car - it will not be recoverable except in some very special circumstances
• DON’T claim the VAT on goods or services used for private purposes. Where there is an element of private use (e.g. mobile phone) an appropriate percentage should be claimed.
• DON’T claim the VAT on entertaining clients and prospective clients, including that on the staff doing the entertaining (but DO claim the VAT paid on entertaining your staff, such as a summer barbecue or Christmas party)
• DON’T forget to account for VAT on intercompany charges (unless within a VAT group registration)