Since the rules on charging and reporting VAT changed in 2010, HMRC has taken a lenient approach to errors in EC Sales Lists. But there are signs that it is now toughening its stance.
When you send an invoice without VAT to a customer in another EU territory, you have to display the customer’s EU VAT number and report the transaction on an EC Sales List. It is all too easy to obtain their VAT number, set up the customer account and use that number for all future invoices.
If the VAT number is no longer valid, you should NOT zero-rate your sale of goods to that customer.
HMRC are checking customer VAT numbers for the sale of goods to customers in other EU countries. It is looking at zero-rated cross-border sales and is raising VAT assessments if the numbers are no longer valid. It is also asking for evidence that goods have been sent out of the UK.
So far it has only focused on goods, but we are expecting a similar change with regard to the supply of services.
Regardless of whether you supply goods or services in the EU, as an absolute minimum you should check your customers’ VAT numbers at least once a year. For high-value sales, a more frequent check is required. In addition, retain evidence so that you can demonstrate to an inspector that you have taken reasonable steps to ensure that numbers are valid.