Requiring a VAT number without applying exemption

[deryk]

Hi,

I'm setting up a store in Actinic v9 selling goods from the UK to the international market.

From what I understand of the tax situation when selling from the UK:

• Sales to the UK should always include UK VAT. If the customer is VAT exempt, we still charge them and they claim it back via the tax office, so there are NO exceptions and so 'Allow exemptions' remains unticked.
• Sales to businesses within the EU are zero rated as long as they provide a valid EC VAT number
• Sales to non VAT registered EU customers (e.g. individuals) are classed as distance selling and should include UK VAT
• Sales to the rest of the world are zero rated

That's fine and for the EU zone if they tick the box and fill in the VAT number then it doesn't charge them VAT.

The problem is in the UK. According to our accounts department if the customer is a business then we are required to record their VAT number - but if we ask for it in the obvious way, Actinic treats it as a VAT exemption like it does in the EU. Yet when selling UK to UK, unless I am misinterpreting HMRC Notice 700, you should always charge VAT, so this is wrong.

Is there any way to require a VAT number (even if individuals were to type the word 'none') without it applying an exemption?

The best solution I've come up with so far is to use the "User Defined" invoice field (Design->Text->Web site(cont)->Invoice Address), set it to "VAT number (If you do not have one, e.g. individuals, type 'none')." and tick the 'Show' and 'Required' boxes. But this won't be very user-friendly for EU businesses, who will have to put their number in twice - once for this required field and once for the exemption.

Any ideas?

Thanks in advance.

[Mike Hughes]

The problem is in the UK. According to our accounts department if the customer is a business then we are required to record their VAT number - but if we ask for it in the obvious way, Actinic treats it as a VAT exemption like it does in the EU. Yet when selling UK to UK, unless I am misinterpreting HMRC Notice 700, you should always charge VAT, so this is wrong.

I'd check with your accounts people again. I only sell retail, but I buy goods from loads of suppliers and don't think they've ever asked me for my VAT number.

I could be mistaken on this but when you sell something to a UK business you're collecting VAT from the seller, so HMRC don't care who it came from, just that you have the money.

When you buy from a business you'll be reclaiming / balancing off the VAT against the VAT on sales in which case HMRC quite rightly want to be able to track what happened to that VAT if they decide to investigate. Hence the need for a proper VAT invoice on purchases.

If HMRC wanted customer VAT numbers on sales then there'd be a requirement for some sort off official VAT purchase order which isn't the case.

Mike

[Golf Tee Warehouse]

The problem is in the UK. According to our accounts department if the customer is a business then we are required to record their VAT number

I am not an accountant but have never heard of that before and would be very surprised if was a requirement from HMRC.

It would also mean that a vast majority of website are breaking the rules.

[leehack]

+1 for me..

[Mark H]

"Sales to the UK should always include UK VAT. If the customer is VAT exempt, we still charge them and they claim it back via the tax office, so there are NO exceptions and so 'Allow exemptions' remains unticked."

My understanding is that you don't charge VAT (it becomes "zero-rated") to VAT exempt customers in the UK - it is your responsibility to make sure they are VAT exempt and you are liable for the VAT amount if they turn out not to be.

Sales to businesses within the EU are zero rated as long as they provide a valid EC VAT number"

Correct - again it is your responsibility to make sure they are valid.

"Sales to non VAT registered EU customers (e.g. individuals) are classed as distance selling and should include UK VAT"

Yes

"Sales to the rest of the world are zero rated"

Yes

"The problem is in the UK. According to our accounts department if the customer is a business then we are required to record their VAT number"

No, unless your accounts department want it for their own purposes.



**EDIT** An example of zero rating to exempt UK customers:

http://www.hmrc.gov.uk/CHARITIES/vat/supplies.htm

[deryk]

Many thanks for the responses everyone. Looks like we won't be requiring a VAT number. Also since it doesn't look like a requirement (just an ability) to allow exemption for UK charities etc we will just stick to always charging VAT in the UK to cover ourselves.

Much appreciated
Deryk

[Mark H]

Safe option, although you might lose a bit of business from genuine charities. We've had one or two potential customers claiming they were exempt when it turned out after investigtion that they weren't. We might have been liable for the VAT amount had we proceeded to zero rate......