A Customer Is Refusing To Pay The Vat Element Of Their Invoice. What Shall I Do?

Q. My Business Recently Hit The Vat Registration Threshold And I Duly Completed The Necessary Forms. That Was Six Weeks Ago And HMRC Have Not Sent The Vat Number. Now A Customer Is Refusing To Pay The Vat Element Of Their Invoice. What Shall I Do?


A: Until you receive the number you cannot issue a valid VAT invoice but that is not to say that you cannot issue invoices. It is permissible to issue invoices that include the amount of VAT, but VAT should not be shown separately. For example, if you are raising an invoice for £1,000 plus VAT the invoice should show £1,200 and then when payment is received the £200 will be available to pay HMRC. You should also ensure that a statement is shown on the invoice confirming that the VAT number has been applied for (e.g. ‘VAT number applied for – a VAT invoice will be issued once received. ‘). When you do receive the number, send a replacement invoice with the correct details to the customer.

However, in your case it would appear that you have issued an invoice which showed the VAT element separately. You can therefore do one of the following:

  1. Ask the customer to pay the net amount as a payment on account and then the remainder being the VAT element at a later date when you are able to issue a valid invoice or
  2. Cancel the invoice with a credit note issuing an invoice for the net amount only with no mention of VAT. Once the VAT number is received, issue a VAT only invoice.

You should liaise with the customer confirming what you intend to do.

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