A guide to help you determine if NI numbers and VAT numbers are valid.

Certain PAYE returns (P35, P11D) will be rejected by HMR&C if a National Insurance number (NINO) is incorrectly displayed. Valid numbers always follow the same format, two letters, followed by six numbers, followed by a single letter. i.e. AB123456D.

The following information sets out the valid alpha prefixes and suffixes. If you are at all uncertain that you have been given a correct NINO, you should check with your local tax office.

Valid National Insurance Number Prefixes:

AA, AB, AE, AH, AK, AL, AM, AP, AR, AS, AT, AW, AX, AY, AZ BA, BB, BE, BH, BK, BL, BM, BT CA, CB, CE, CH, CK, CL, CR EA, EB, EE, EH, EK, EL, EM, EP, ER, ES, ET, EW, EX, EY, EZ GY HA, HB, HE, HH, HK, HL, HM, HP, HR, HS, HT, HW, HX, HY, HZ JA, JB, JC, JE, JG, JH, JJ, JK, JL, JM, JN, JP, JR, JS, JT, JW, JX, JY, JZ KA, KB, KE, KH, KK, KL, KM, KP, KR, KS, KT, KW, KX, KY, KZ LA, LB, LE, LH, LK, LL, LM, LP, LR, LS, LT, LW, LX, LY, LZ MA, MW, MX NA, NB, NE, NH, NL, NM, NP, NR, NS, NW, NX, NY, NZ OA, OB, OE, OH, OK, OL, OM, OP, OR, OS, OX PA, PB, PC, PE, PG, PH, PJ, PK, PL, PM, PN, PP, PR, PS, PT, PW, PX, PY RA, RB, RE, RH, RK, RM, RP, RR, RS, RT, RW, RX, RY, RZ SA, SB, SC, SE, SG, SH, SJ, SK, SL, SM, SN, SP, SR, SS, ST, SW, SX, SY ,SZ TA, TB, TE, TH, TK, TL, TM, TP, TR, TS, TT, TW, TX, TY, TZ WA, WB, WE, WK, WL, WM, WP YA, YB, YE, YH, YK, YL, YM, YP, YR, YS, YT, YW, YX, YY, YZ ZA, ZB, ZE, ZH, ZK, ZL, ZM, ZP, ZR, ZS, ZT, ZW, ZX, ZY

The characters D, F, I, Q, U and V are not used as either the first or second letter of a National Insurance Number prefix.

Valid National Insurance Number Suffixes:

The final alpha of the NINO should be A, B, C, or D.
VAT Registration numbers

There are occasions when the validity of a VAT registration number is critical. Particularly:

• When you make a supply to a registered European Union trader, or
• When you receive an invoice from a supplier on which VAT has been added.

Supply to EU trader

If it appears that the VAT number you have been given is incorrect, you should charge VAT rather than exempt the supply.

Purchase of goods/services from registered UK trader.

One of the aspects that qualifies a supply for a reclaim of input tax charged, is if the invoice shows a valid VAT registration number. Although HMR&C have discretion to allow a deduction even if the number is wrong, the discretion only applies in certain circumstances.

How to check a VAT registration number.

There are two ways to check the validity of a VAT number:

1. Call HMR&C 0845-010-9000.
2. A more hi-tech solution, visit the Europa web site at http://ec.europa.eu/taxation_customs/vies/vieshome.do, select the correct member state and enter the VAT number you have been given. This will only confirm if the number is a valid registration number. There is no way to use this service to confirm the number belongs to your customer/supplier

Davies McLennon are Stockport Accountants

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We seem to be entering a period when banks are likely to have less money to lend, and when they do lend interest rates charged will be “realistic”. The self styled liquidity crisis is with us!

Consequently the management of your cash resources will be critical in the coming months as businesses chase liquidity by tightening up on their credit control. This process will of course be frustrated as creditors hang on to cash reserves by extending the credit they take from suppliers.

If your business qualifies, and you are not already using the scheme, the VAT Cash Accounting scheme could be a lifesaver.

What are the rules of the cash accounting scheme?

• VAT is accounted for on a payments basis i.e. output tax due on date of payment from a customer; input tax can be claimed when a supplier is paid
• available to any business with annual taxable sales of £1.35m or less (zero-rated sales are still taxable but exempt sales are not; exclude any sales of capital assets)
• no application form needed to join the scheme - can be adopted by an eligible business at the beginning of any VAT period
• before adopting the scheme, a business must ensure it is up-to-date with its VAT returns and payments.

What are the advantages of using the cash accounting scheme?

• automatic bad debt relief - because output tax is never declared until a payment is made by the customer
• cash flow benefits by delaying payment of output tax from invoice date until payment is made by a customer
• simplified record keeping - VAT can be accounted for through a cash book - no need for separate sales/purchase day books
• the scheme is of particular benefit (for cash flow purposes) to a business that gives extended credit terms to its customers in relation to standard rated sales

What are the disadvantages of using the cash accounting scheme?

• input tax cannot be claimed until payment is made to a supplier
• the scheme will not benefit a business where most/all sales are zero-rated e.g. a milkman
• the scheme will not benefit a business where sales are paid for, either in advance of invoicing, or at the same time a sales invoice is raised

How does a business apply to join the cash accounting scheme?

• there is no requirement to notify HMRC in advance of using the scheme
• scheme can be adopted by any eligible user (i.e. taxable sales of £1.35m or less) at the beginning of any VAT period
• the scheme can only be used from a current VAT period i.e. no retrospective use

Will HMRC ever prevent a business from using the scheme?

• as long as a business is up-to-date with its VAT returns and payments, and has not been convicted of a VAT offence within the last 12 months, then use of the scheme will always be allowed
• a business must withdraw from the scheme if its taxable sales exceed £1.6m per year (VAT exclusive)

At what point may or must a business leave the scheme?

• a business can voluntarily withdraw from the scheme at the end of any VAT period
• a business must withdraw from the scheme if the value of its taxable supplies has exceeded £1.6m per annum
• HMRC has the power to impose compulsory withdrawal in order to protect the tax yield

If you would like us to check out the viability of Cash Accounting for your business, please call.

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The VAT registration threshold increased from £64,000 to £67,000 from 1 April 2008.

The VAT deregistration threshold is increased from £62,000 to £65,000 from 1 April 2008.

The legislation relating to the option to tax land and/or buildings will be simplified and minor changes will be introduced to enable taxpayers to revoke an ‘option to tax’ after 20 years.

From 1 July 2008 the voluntary disclosure threshold is to increase from £2,000 to the greater of: £10,000 or 1% of turnover (subject to a maximum of £50,000)

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If you own a business property you are probably aware if the property is subject to an election to tax for VAT purposes. If you charge VAT on the rents invoiced to your tenants, you will have an election to tax in place.In certain circumstances this can be a commercial inconvenience!

Rental issues
For example certain businesses, banks, unregistered small businesses, will be keen to find premises that have no election to tax in place, otherwise they will be charged 17.5% VAT which they cannot recover.

Purchase and sale
If there is an existing election to tax when a property is sold 17.5% VAT is added to the sale price, a significant problem if you are a purchaser who is not registered for VAT.

2009 and the 20 year rule
The election to tax, once made, cannot be revoked for 20 years. Interestingly the first elections to tax were granted in 1989, 20 years ago next year!

If there would appear to be an advantage for the original election on your property to be revoked, you may like to find out when the election was granted. If it was during 1989, you should be able to file a formal revocation on the 20 year anniversary date.

Flat Rate Scheme

Beware of selling a property if you are in the flat rate VAT scheme. Ask our advise before you sell.

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