VAT Registrations and Simplifications in UK
When do I need a UK VAT number?
As a general rule, a foreign business must register for VAT in UK as soon as a taxable supply is made. Registrations thresholds no longer apply to non-established companies. The following are some usual examples of taxable transactions:
- Domestic supply of goods not reverse charged: A supply of goods located in UK where reverse charge does not apply requires a VAT registration of the supplier.
- Supply of services not reverse charged: Foreign non-established businesses supplying services on which UK VAT is due must register for VAT. These services are rather exceptional, as the general B2B rule would apply.
- Export: Exporting goods to a non-EU country requires a VAT number before the export is made.
- Intra-Community acquisition: Acquiring goods from another Member State where all conditions for intra-Community movements are met requires the customer to register for VAT.
- Intra-Community supply: Supplying goods another Member State is also a taxable transaction that obliges the supplier to register for VAT.
- Distance sales above the threshold also require a VAT number. See UK distance sales rules for more information.
Companies can also register voluntarily in the UK. For example, if they are incurring UK VAT but not making any taxable transaction, it is possible to register for VAT and claim the VAT incurred via the VAT return instead of the 8th or 13th Directive.
The VAT registration threshold for established UK companies is £82,000. As mentioned above, this limit does not apply to non-established businesses.
Fiscal representative requirements in UK
In general, non-EU businesses do not need a fiscal representative when registering for VAT purposes in UK. Unlike other EU countries, EU and non-EU companies can register directly for VAT in the UK.
Registering directly means that the legal representative of the company can sign the registration form without any local UK involvement.
Non-EU companies in certain industries like e-commerce may be required to appoint a fiscal representative when registering in the UK. Where appointed, the fiscal representative is jointly and severally liable for the VAT obligations of the company.
UK VAT groups
UK has one of the most flexible and broader VAT grouping regime in Europe. Two or more resident UK businesses can apply (not mandatory) to create a VAT group. These companies must satisfy the "common control" test and tax avoidance conditions set in section 43A of the VAT Act. A VAT group is treated in the same way as a single taxable person. Intra-group supplies are disregarded for VAT purposes and every member is jointly and severally liable for VAT liabilities of any group member. The same VAT number is granted to all members of the VAT group.
To apply for a VAT group in the UK, you must complete forms VAT 50 and VAT 51. Further information about the application process and VAT group conditions is available in the Guidance published by HMRC.
UK consignment and call-off stock
UK has introduced a call-off stock simplification. Where a company moves stock from one EU country into the UK and place the goods in a storage location under the client control, the VAT registration of the supplier can be avoided provided the client is VAT registered, the customer has logistic control of the goods and only one customer benefits from the initial supply (either for own consumption of for onward supplies).
If the supply does not qualify as call-off stock (e.g. it is considered as "consignment") the supplier will need a VAT registration in the UK in order to self-account for the movement of own goods into UK (deemed IC-Acquisition) and subsequent domestic sale to the client.
Bad debt relief in UK
UK has rather easy bad debt relief regime in comparison with other EU countries. VAT amounts that are not collected from the customer but have been paid as output VAT to the tax authorities can be recovered when:
a) Six months have passed since the issuance of the invoice and;
b) The debt was written off in the business accounts.
There are no additional formalities (e.g. no credit notes, corrective returns or letters to the authorities are not required). VAT on bad debt can be claimed directly in the next VAT return once the conditions have been met.
UK import VAT deferral and postponed VAT accounting
UK allows two systems of import VAT deferral (standard deferral and SIVA). However, postponed import VAT accounting does not exist in the UK.
Import VAT and duty deferment is allowed for established and non-established VAT registered companies in the UK. The payment of import VAT, custom duties, excise duties and other levies is deferred until the 15th day of the following month. The payment must be made by direct debit from a UK bank account. To benefit from this scheme, taxpayers should submit an application using the form C1200 and instruct the bank to set up the direct debit. A bank guarantee is required and HMRC should be informed of such guarantee by filing the form C1201.
There is also a simplified import VAT deferral system called "Simplified Import VAT Accounting" (SIVA). This system only applies to import VAT (not to customs tariffs) and it requires a lower level of financial security than import VAT deferral. VAT registered businesses in UK can apply for SIVA through the online services of HMRC.
Postponed import VAT accounting allows import VAT to be reported in the VAT return as due and deductible, hence with a nil financial effect for the importer (unless it is a partially exempt business). This system does not exist in the UK.
Customs (bonded) warehouse and VAT warehouse in UK
UK has different customs warehouses, however, there is no specific VAT warehouse for goods that have already cleared customs (T2 products).
The following customs warehouses exist in UK:
- Customs and Excise warehouse: It suspends all taxes, levies and duties on T1 and T2 goods within this warehouse
- Excise warehouse: Only T2 goods (in free EU circulation) subject to excise duties such as alcohol, tobacco or certain minerals can benefit from this regime
- Customs warehouse: Applicable to T1 goods only excluding goods subject to excise duties. These goods should also be subject to customs duties
- Fiscal warehouse: Only certain goods are allowed in fiscal warehouses. Retail goods are not allowed
Global VAT numbers – UK limited fiscal representation
Global VAT numbers, also known as freight forward VAT numbers or limited fiscal representation do not exist in UK.
Cash accounting in UK
Cash accounting simplification is possible in UK. Businesses with an annual turnover below £1,350,000 can apply to account for VAT on all supplies when the payment is received. Similarly, input VAT is only claim on an invoice-paid basis rather than invoice received. One you are part of this scheme, you do not need to leave it until your turnover reaches £1,687,500.
More information on eligibility and application process can be found in the website of the UK Tax authorities.