Slow VAT registrations – how to cut the chances of delay

The high volume of applications for VAT registration numbers continues to cause delays and frustration.

Anyone starting a new business, registering an existing business or taking over an existing business needs to register for VAT. But back in February, HMRC issued a note to several public bodies acknowledging there were some processing delays although 70% of applications were processed within 30 days and the majority of cases within five working days, they said at the time.

However, accountancy firms and businesses say there is still a three-to-four month backlog in some cases. HMRC says that in some instances, processing delays have been due to common errors on the application forms.

 To help reduce common errors seen on VAT application forms, it advises:

• Using the online VAT registration service where possible in place of paper forms.
• Checking that addresses provided on the VAT1 form match the businesses’ principal place of business (PPOB).
• Checking that the notification of trade classification corresponds to the nature of the business.
• Correctly identifying the VAT liability.
• Ensuring a valid signatory for the application is used (e.g. company director, company secretary or other authorised signatory).
• Ensuring correct dates are used on the application (e.g. effective date of registration should match up to the circumstances outlined in the form).
• Ensure bank details provided are in the name of the taxable person.

Accountants share their recent experience with VAT registration for new applicants.

Simple VAT applications are taking longer to process than more complex ones

Jacob Graham, business services manager, Prime Accountants Group

At present, the processing speed for new VAT registration is fairly inconsistent. We’ve seen some VAT registrations processed within a week, and others taking over three months. However, we have noticed the more complex cases seem to be processed efficiently, whereas ones we would assume are more simple are actually delayed.

As we file registrations on behalf of our clients, we know many are becoming impatient. Wanting the best for our clients, we often find ourselves having to chase HMRC to ensure it is completed, as a further delay could stall their trading.

As the more simple applications are being held up, we can only assume the team dealing with these is not large enough. However, the fault may not entirely lie with HMRC. The forms can be complex for businesses completing them for the first time and errors are easily made. Therefore while HMRC spend further time investigating these errors, new applications build up.

Next steps: It’s important that businesses check and double check their application forms to ensure there are no errors as this will cause unnecessary processing delays.

Verdict: Simple applications are taking longer to process due to build up of new applications.

Delays could be due to VAT registrations being made prematurely

Kevin Winterburn, director, Sheards Accountancy

Our recent experiences with processing new VAT registrations with HMRC has been relatively speedy, with applications processing within two days or so. We’ve not experienced any delays for our clients, but it does really depend on the type of applications you are submitting. 

For us, when we have a new client who would like to register their brand new business, we always recommend waiting until after the business has completed its first sale. We’ve noticed that if the business is seen as active by HMRC after completing a sale, then the application usually goes through at normal speed. If you try to register a brand new business before it is seen to be active, that can cause significant delays with HMRC. This could be the issue businesses are seeing at this time.

Next steps: Wait until the business has made its first sale before registering for VAT to avoid delays.

Verdict: Brand new business may experience delays with HMRC if they register their business for VAT before they have made their first sale.

Delays to VAT registrations severely restricts business activity

Andrew Jackson, UK200 Group Tax Panel chair & head of tax at Fiander Tovell

Talking to clients and colleagues, the situation is that anything that can be processed automatically (e.g simple online registrations) can be dealt with fairly promptly, but anything requiring input from HMRC is badly delayed.  This includes international issues and postal applications. For example, one postal application submitted in December wasn’t dealt with until May. And sometimes, telephoning HMRC at 08:59 you’re told the office is closed, yet phone at exactly 09:00 and they’re ‘too busy’ to answer.

A business which hasn’t been given a VAT number is badly hamstrung: it can’t issue final invoices, and for many purposes, a VAT number is proof of being in business.

This pattern can also be seen across other taxes, though it doesn’t work the other way: HMRC often gives taxpayers two weeks or less to respond to a letter, while taking nine months to read their own post.

HMRC simply needs more resources. Digitalisation may make a difference in the long run, but in the short term we need more people doing the job. If HMRC doesn’t turn the wheels, the economy grinds to a halt.

Next steps: Submit applications online rather than via post and check application form to ensure it is all relevant and correct information to reduce HMRC input and therefore delays.

Verdict: HMRC needs more resources including people to help process the number of applications. Otherwise, delays to VAT registrations severely restricts business activities.

Annie Makoff is a freelance journalist and editor.