Can you invoice before receiving your VAT registration number?

Many companies begin trading before HMRC has completed their VAT registration. If you need to invoice clients during that time, it’s important to understand what you can – and can’t – do while you wait.

It’s a common issue, particularly for new contractors who have completed their first week or month’s work.

That often raises the same question: should you wait for your VAT registration number to be confirmed, or invoice your client anyway?

In most cases, there is no need to delay sending invoices while you wait for your VAT registration number. The important thing is understanding what you can and cannot do during that period. In this guide, Michael McCullion, Managing Director of Bright Ideas Accountancy, explains how to invoice correctly while your VAT registration is still being processed.

When does your VAT registration begin?

The key date is your effective date of registration rather than the day HMRC approves your company’s application.

If your company is required to register because its taxable turnover has exceeded the VAT registration threshold (currently £90,000), HMRC will set the date from which the registration takes effect.

If you are registering voluntarily, you will usually choose an effective registration date as part of the application.

Your company may therefore need to account for VAT from that date, even if HMRC hasn’t yet issued your VAT registration number.

Can you invoice while waiting for your VAT number?

Yes. There is no requirement to delay invoicing simply because your application is still being processed.

However, you should not issue a VAT invoice until HMRC has provided you with your VAT registration number.

That means you cannot show VAT as a separate item on the invoice or describe it as VAT.

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Instead, many businesses continue invoicing as normal while making clients aware that a VAT registration application is pending.

Once the registration number arrives, you can issue a valid VAT invoice for any supplies made from the effective date of registration.

Should you tell your client?

Where your VAT registration is still pending, it’s sensible to make your client’s accounting team aware before invoicing.

That way, they know why your first invoice doesn’t include a VAT registration number and won’t be surprised if you later issue a VAT invoice covering the same work.

Most larger businesses and recruitment agencies come across this regularly, so it is unlikely to cause any problems.

What happens when your VAT number arrives?

Once your VAT registration number has been issued, you can begin issuing VAT invoices for work carried out from your effective registration date.

A VAT invoice must include all of these fields:

• Your VAT registration number.
• The tax point.
• The net amount.
• The VAT rate.
• The VAT charged.
• The total amount payable.

If you’ve already sent an invoice while waiting for your VAT registration number, you don’t normally need to invoice the work again. Instead, once your registration has been confirmed, you can issue a VAT invoice for the original supply.

Your customer can then use that VAT invoice to reclaim the VAT in the usual way, assuming they are VAT registered.

What if your client has already paid?

Many contractors worry about what happens if the client has already paid.

In most cases, it isn’t a problem. Once your VAT registration number has been issued, you can provide a VAT invoice for the work, provided it falls within your VAT registration period.

If your client is VAT registered, they can normally recover the VAT from HMRC in the usual way.

Don’t forget about the VAT you owe

A common misconception is that you don’t need to worry about VAT until HMRC issues your registration number.

In reality, your VAT liability usually starts from your effective date of registration, not the day your application is approved.

If you’ve invoiced customers during that period, you’ll still need to account for the VAT on those sales. For that reason, it’s sensible to set the money aside rather than treat it as income that can be spent.

Can you reclaim VAT on earlier purchases?

Before moving on to your first VAT return, it’s worth checking whether your company can reclaim any VAT on earlier purchases.

In some cases it can. Exactly what can be claimed depends on what was bought and when it was purchased, so the rules are slightly different for goods and services.

Read more in our guide to reclaiming VAT on pre-registration costs.

Keep accurate records from day one

While you’re waiting for your VAT registration number, keep your records up to date as you normally would.

Save copies of the invoices you issue, keep your purchase invoices, and note when work was carried out. It’ll make issuing VAT invoices and preparing your first VAT return much easier once your registration has been confirmed.

If you use cloud accounting software (FreeAgent is the tool of choice in the contracting world), updating your records afterwards is usually straightforward.

Read our complete guide to VAT here.