United KingdomManual

The UK has a standard VAT rate and one reduced VAT rate. In addition, a number of items are zero rated

VAT Registrations and Simplifications in UK

UK VAT number

As a general rule, a foreign business must register for VAT in the UK as soon as a taxable supply is made. Registration 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 the 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 reverse charge on foreign services rule would apply.
  • Import: Importing goods into the UK often requires a VAT number and an EORI number before importation. The EORI number must be issued by HMRC before the import takes place. EU EORI numbers are not valid since 2021. There are several simplifications in customs procedures in the UK, so we recommend checking the exact administrative obligations of your planned activity with one of our experts.
  • Export: Exporting goods to a non-EU country requires a VAT number before the export is made.
  • Supplies of goods sold online by a foreign seller will require a VAT registration when the goods are in the UK at the point of sale. For example, if you store your products in a UK warehouse (eg. Amazon FBA program), you will need to register for UK VAT.
  • Supplies of goods sold online.

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 using the form VAT65A and the process foreseen by HMRC for non-VAT registered businesses.

The VAT registration threshold for established UK companies is £85,000. As mentioned above, this limit does not apply to non-established businesses.

You can read more about the obligation to register for VAT in the notice published by HMRC about who should register for VAT. Section 8 in this notice covers non-established companies.

UK VAT number format

  • Country code:  GB
  • Structure:  GB999 9999 99
  • Format (excludes 2 letter alpha prefix):  1 block of 3 digits
  • Structure:  GB999 9999 99 999
  • Format (excludes 2 letter alpha prefix):  1 block of 4 digits and 1 block of 2 digits
  • Comments:  Identifies branch traders
  • Structure:  GBGD999
  • Format (excludes 2 letter alpha prefix):  The above followed by a block of 3 digits
  • Comments: Identifies Government Departments
  • Structure:  GBHA999
  • Format (excludes 2 letter alpha prefix):  1 block of 5 characters
  • Comments:  Identifies Health Authorities

Fiscal representative in the UK (requirements)

In general, foreign businesses do not need a fiscal representative when registering for VAT purposes in the UK. Unlike other countries in Europe, foreign companies can register directly for VAT in the UK.

Registering directly means that the legal representative of the company (eg. a director in the company) can sign the registration form without any local UK involvement.

Non-UK companies from countries with whom the UK does not have an agreement for the exchange of tax information may need 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.

You can find more information about fiscal representative requirements in our overview of fiscal representative obligations in Europe.

UK VAT groups

The UK has one of the most flexible and broader VAT grouping regimes 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 guide published by HMRC.

UK consignment and call-off stock

As a consequence of Brexit, the UK no longer applies a simplification on call-off stock or consignment stock activities.

Before Brexit, it was possible for the supplier to avoid a VAT registration in the UK using the EU and local simplifications available for this activity. However, as of 2021, it is mandatory that the supplier imports the stock in the UK and clears customs in order to have these goods entering the UK territory. VAT on these imports will be recoverable via the VAT return. The subsequent sales of these products to a local business will be treated as a domestic sale on which the supplier will need to account for VAT.

Likewise, UK businesses moving their stock into other EU countries will need to register for VAT in the EU country of arrival because the simplifications are normally foreseen only for intra-Community movements.

If your business is affected by the new rules on consignment or call-off stock and you need help registering for VAT or evaluating your VAT needs in UK, contact one of our experts to get help.  

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Bad debt relief in the UK

The UK has a 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, b) the debt was written off in the business accounts, c) the value of the supply does not exceed the arm's length price on that supply and d) the debt was not sold or factored under a valid legal assignment.

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.  

Check the UK tax authorities VAT notice on bad debts to know more about how to recover VAT on unpaid invoices.

UK import VAT accounting

If you import goods in the UK, you can pay import VAT with a simplified mechanism called postponed import VAT accounting.

You will still need to comply with administrative requirements such as getting an EORI number or completing customs declarations. 

What is import VAT accounting?

Import VAT allows you to pay and deduct VAT simultaneously in your VAT return.

Normally, import VAT is paid to the tax authorities upon importation of the goods.  The importer will then be able to claim back that import VAT via the VAT return. The time lapse between the payment of import VAT at importation date and the effective recovery at VAT return submission date (or refund date) has negative cash flow implications for the importer.

With postponed import VAT accounting, you can pay and deduct VAT at the same time in your VAT return. You will declare import VAT as payable in box 1 and include that same amount as deductible in box 4. Effectively, this means no cash-flow implications on your import VAT as fully taxable business.

When can I use import VAT accounting in my VAT return?

You can use this scheme if you bring goods from abroad in the United Kingdom and you will use these goods for business purposes as part of your company's activity.

It is important that you include your VAT number in the customs declaration. You should also get an EORI number.

You do not need pre-approval from HMRC to declare and pay import VAT in the VAT return. You only need to indicate that you are using this simplification in your customs declaration.

In some instances, it is mandatory to use import VAT accounting. If you are importing goods between 1 January and 30 June 2021 and you either a) delay your customs declaration or b) use a simplified customs declaration, you must use this scheme to account for import VAT.

If you are a non-established company, you must appoint an indirect representative and tell them that you are using postponed import VAT accounting.

Northern Ireland is excluded from the territory of the UK for VAT purposes, so you should follow different rules if your goods are arriving in Northern Ireland.

How to complete your VAT return with import VAT accounting?

When using import VAT accounting, you should complete the following boxes in your VAT return:

  • Box 1: Import VAT amount, together with the rest of your total VAT due
  • Box 4: Import VAT amount, together with the rest of your total VAT deductible
  • Box 8: Total value of your imports, together with the rest of your total purchases (net value). You should not include any VAT in this box.

There are special rules if you are using cash accounting, delayed customs declarations, or if you are in the flat rate scheme for small businesses.

You can read more information about how to complete your VAT return with postponed import VAT accounting in the manual published by HMRC about this topic.

Customs (bonded) warehouse and VAT warehouse in the UK

The 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 the 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

Cash accounting in the UK

Cash accounting simplification is possible in the 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.

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