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How to Submit a Successful VAT Registration Application

When an application for VAT registration is made an assessment procedure is undertaken by HM Revenue and Customs primarily to determine the credibility and risk associated with that individual submission.

One of the inherent risks with companies being granted VAT registration from HMRC’s point of view (particularly for newly incorporated businesses which have yet to start trading), is that they are likely to pay more VAT on purchases than they initially receive when from sales.

Set up costs, stock purchases and so on often occur before any sales are made and thus many companies make VAT repayment claims in the first few VAT return quarters. Some businesses may incur substantial company set-up costs for months or even years before any significant sales revenues are generated.

Thus they might be in a VAT repayment position, reclaiming large sums from HMRC all on the basis that at some time in the future their anticipated sales will materialise.

In order to negate this inherent risk HM Revenue & Customs will use their vast previous experience in an attempt to identify markers which may represent positive pointers towards a credible VAT application and those which may suggest the opposite.

Many of these pointers we believe are common-sense attributes which the average person would seek to identify and evaluate if a VAT application was placed before them.

So what they?

When a newly formed company seeks to trade, there are a number of elements which may be typically used which can act as evidence to support that notion.

  • Having a company website and domain. The selection of a company name often follows or accompanies the procurement of a suitable web presence. Being able to provide domain and website details during the VAT registration application stage is indicative or an intension to trade. It may also provide an HMRC assessor with more specific information on the company’s products and services and its chosen distributions channels.

  • Details information of company’s activities. A note describing the company’s activities as “buying and selling goods in the internet” is not clearly sufficient to provide HMRC with the information they will require on the proposed activities of the business. It might even appear as if the directors lack a coherent business plan to achieve any kind of revenue generation.Detailing the specific goods or services to be sold, whether as a retailer, wholesaler or manufacturer provides more information and also credibility.

  • Estimated sales in the next 12 months. Whilst any estimate is typically subjective, providing figures which are realistic can aid a VAT registration application. Entering zero sales revenue (this happens more often than one may think) may act as a red flag to HMRC and beg the question “why register at all”.

  • Markets and Suppliers. When a new company intends to sell goods or services, as part of a credibility test HM Revenue and Customs might request details of any agreements or other correspondence with future customers and suppliers.Particularly where goods are to be sourced, the company may reasonable by expected to be able to furnish HMRC with businesses who would provide these items.
There are many criteria and a fairly complex assessment structure in place to determine which companies are issued VAT numbers and under what (if any) conditions or circumstances.

It is our belief that most companies seeking to start trading on the basis of having conducted some reasonable research and having a credible business plan would be able to demonstrate this fact to HM Revenue & Customs and thus be successful with their VAT Registration Application.
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