VAT number validation: what are the risks for recruitment businesses?

19 April 2023

Failure to take reasonable care validating VAT numbers can result in unexpected costs and penalties. The misuse of VAT numbers is a key aspect of many instances of VAT fraud, and a lack of due diligence in the supply chain can contribute to a change in the HMRC risk rating for your business.

In addition to reputational concerns, a recent court case won by HMRC has highlighted the need for companies to check they have a valid invoice (including VAT number) to support each tax input claim on their VAT return. If this isn’t done, HMRC can refuse the right to VAT recovery.

Key considerations for the recruitment sector

Whilst all businesses with a large volume of customers and suppliers are affected, this issue is particularly important for recruitment companies as self-billing places additional onus on the customer to ensure supplier details are correct. Therefore, there is additional pressure on recruitment businesses to ensure compliance within their supply chains. 

This is an area where HMRC are increasingly expecting businesses to implement robust controls, to ensure that the VAT treatment applied to an invoice (or self-billed invoice) can be justified based on the profile of the supplier or customer.

How RSM can help

Our VAT Number Checker software has been designed to tackle this issue. It allows you to validate both UK and EU VAT numbers in bulk, whilst also validating company names and addresses within your records. This helps ensure your VAT risks are managed efficiently and effectively.

It is a self-serve tool, meaning there is no restriction on how often you use the service. The automated cross-matching of names and addresses allows verification of company name and address details stored against the tax authorities’ records. It will identify if you have received a valid VAT number, but it is not affiliated to the expected entity. This assists with ensuring accurate storage of VAT registration data for each customer and supplier, whilst potentially identifying instances of fraud. 

Learn more about our VAT Number Checker software.

RSM's VAT number checker