United Kingdom

VAT Basics

United Kingdom VAT rates

Since 2021, the UK has the right to decide which products benefit from reduced VAT rates. This list is limited by the EU VAT directive in EU countries. Following Brexit, the UK is able to define the scope of reduced VAT rates. For example, women's sanitary products are zero-rated since 1 January 2021.

You can find more information about VAT rates in the UK in the guide published by HMRC about this topic.

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Vat Tax in the UK

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UK VAT Deduction limits

Input VAT can generally be deductible if the goods or services are used for business purposes. There are however certain items that are never deductible.

The below list provides detail on deduction rules for each type of expense:

• Input VAT on hotel accommodation or restaurant meals is 100% deductible provided the expense is incurred for business purposes by employees of the company
• Input VAT on conferences, fairs and exhibitions is 100% deductible provided the expense is incurred for business purposes by employees of the company
• Business gifts are 0% deductible
• Car rental, car repair and fuel expenses are 50% deductible where the expenses is connected to both, business and personal purposes. If wholly and entirely for business purposes, then VAT can be deducted at 100%
• Taxi, train and other transport expenses is 100% deductible provided the expense is incurred for business purposes
• Entertainment client expenses are generally 0% deductible unless they are provided to overseas customers

Deducting VAT prior to the beginning of the economic activity is only allowed on certain items. These include services supplied within six months before the registration date and VAT incurred on stock items that remain on stock on the date of registration.

UK Statute of limitations on VAT: A Complete Guide

Navigate the complexities of the UK statute of limitations for VAT. Identify the periods after which legal action becomes impossible and plan your VAT compliance accordingly.

What is the Statute of Limitations in the VAT Context?

The statute of limitations is a crucial legal time frame within which authorities can investigate tax liabilities, including VAT. Likewise, it determines the period taxpayers have to claim VAT reimbursements on invoices received.

How Do Limitation Periods Affect Different VAT Claims?

In the UK, the general statute of limitations for VAT is four years. Here’s how it applies to various VAT scenarios:

• Input VAT: Must be claimed in a VAT return filed no later than the end of the fourth year following the year in which the deductible VAT was due. Special rules apply for pre-registration expenses.
• Output VAT: The obligation to pay VAT also falls within a four-year limitation period. However, in cases of fraud or deliberate non-compliance, this can extend to 20 years.

For pre-registration expenses, businesses can reclaim VAT on goods purchased within four years, provided they still possess the goods (or goods created from them). For services received, the limitation period is six months.

For further details, refer to HMRC's manual on VAT assessments and time limits.

You can find more details about time limits on VAT assessments in the UK in the manual published by HMRC about this topic.

When Does the Statute of Limitations Commence?

The clock on the UK statute of limitations starts ticking at the end of the accounting period where the invoice should have been declared, or the date of importation or other acquisition. More information can be found here.

Why is important the statute of limitations for businesses?

Understanding the statute of limitations is vital for effective VAT management. It dictates the time frame within which you can retroactively claim VAT on received invoices, and how far back tax authorities can go to assess VAT on issued invoices.

For example, if you forgot to account for the VAT paid on an invoice received some time ago, you shall consider the statute of limitations. You will only be able to deduct it now if this period is not expired. If you did not deduct this input VAT in the corresponding reporting period, this is considered an error, and you may need to correct the VAT return for such reporting period.

Practical Implications

If you overlooked VAT paid on an old invoice, the statute of limitations will determine whether you can still claim it. If missed, this constitutes an error that may require a corrected VAT return for that reporting period.

Moreover, if you discover inaccuracies in your VAT declarations related to sales invoices, the statute of limitations will influence your ability to amend those returns.

Have a look at the section from our manual about UK corrective VAT returns.

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UK tax point rules

The tax point is the time when VAT becomes due. VAT due should be distinguished from VAT payable. VAT is due when the tax point occurs. VAT is payable between the day after the end of the reporting period and the due date to submit and pay the VAT return. For example, for a supply of goods completed on 15 February, VAT is due on 15 February. However, VAT will become payable as from 1 April  (if the taxpayer follows calendar quarters).

• General rule: Tax point arises when the goods are placed at the disposal of the customer or when the services are completed.
• Prepayments or advanced payments create a tax point. In these cases, VAT is due when the prepayment is made. Exceptions apply to security deposits.
• If an invoice is issued either before or 14 days after the time of supply, the date of payment or the date of the invoice (whichever is earlier) is deemed to be the tax point. Taxpayers can apply for an exception to this rule.
• Import: Tax point occurs when the goods are imported according to the relevant import documents.
• Online sales: If the value of the sale of goods dispatched from outside the UK is below GBP 135, the tax point occurs at the moment of the sale, and not at the moment of import.

HMRC published a notice about applicable rules on tax point. This notice explains the general rules as well as the exceptions on tax point rules in the UK.

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UK VAT registration: Everything you Need to Know

This comprehensive guide provides an in-depth look at UK VAT registration. Whether you're a domestic or foreign business, understanding how to get a UK VAT number is crucial for legal compliance and smooth business operations in the UK.

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Registering for VAT in the UK

Registering for VAT in the UK is a necessary administrative step for businesses that wish to charge VAT on their invoices and submit VAT returns. Beyond legal compliance, there are benefits and implications for getting a UK VAT number. Some businesses are mandated to register due to the nature of their activities, while others opt for voluntary registration.

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Who Needs a UK VAT Number?

UK businesses must register for VAT if they exceed the VAT registration threshold, currently set at GBP 85,000. A UK VAT number becomes obligatory if:

• Your total VAT taxable turnover for the past 12 months exceeds GBP 85,000, or
• You anticipate that your turnover will surpass GBP 85,000 in the next 30 days.

Non-UK businesses must register for VAT immediately upon making a taxable supply in the UK. Registration thresholds are not applicable to foreign businesses. Here are some common
taxable transactions:

• Domestic supply of goods where the reverse charge doesn't apply.
• Certain services supplied by foreign businesses that require UK VAT.
• 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. Check the section about UK VAT rules on e-commerce.

In case you are a non-established business incurring UK VAT but not making any taxable transaction, it is possible to claim the VAT incurred using the form VAT65A and the process foreseen by HMRC for non-VAT registered 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.

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Voluntary VAT Registration in the UK

While UK businesses can voluntarily register for VAT even if they don't meet the GBP 85,000 threshold, foreign businesses are generally not allowed to do this.

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Benefits of Getting a UK VAT Number

Having a UK VAT number allows you to reclaim VAT on business-related expenses and imports. Additionally, you can benefit from postponed VAT accounting mechanisms, allowing you to defer your VAT payments.

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Required Documents for UK VAT Registration

Domestic companies need to provide the following:

• Company details
• Company Registration Number (CRN)
• Unique Tax Reference (UTR) number
• Information on Corporate Tax, PAYE, and self-assessment

Foreign businesses must provide:

• VAT certificate from their home country
• Excerpt from the Trade Register
• Passport copies of legal representatives
• Proof of UK business activities

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Step-by-Step Guide to UK VAT Registration

Here's a simplified step-by-step guide for foreign businesses:

• Marosa will send you an information request. This is the list of information and documents required to proceed with the registration preparation.
• Provide English translations of supporting documents.
• Marosa will complete the online registration form and set up your HMRC account.
• Sign and return necessary proxy for Marosa.
• Marosa submits the form online together with the supporting documents.
• We may have to respond to additional queries from HMRC.
• Receive the VAT certificate, typically sent via post.

The process is similar for UK businesses but requires different supporting documents.

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UK VAT number format

The UK VAT number has various formats:

• Standard: GB999 9999 99
• Branch Traders: GB999 9999 99 999
• Government Departments: GBGD999
• Health Authorities: GBHA999

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Do I need a Fiscal Representative in the UK?

Fiscal representation is generally not required for either domestic or foreign businesses in the UK. Unlike other countries in Europe, foreign companies can register directly for VAT in the UK.

Exceptions may apply for countries without tax information exchange agreements with the UK.

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

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How Long Does It Take to Register?

Receiving a UK VAT number usually takes around 30 days but can extend up to 2-3 months due to increased scrutiny by HMRC.

According to the HMRC recommendation, although you cannot include VAT on your invoices while waiting for your VAT number, you can increase your prices to account for the VAT that you will need to pay to HMRC.­ Find more information here.

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Choosing a VAT Accounting Scheme

The standard scheme is commonly used, but businesses can opt for specialized schemes like the VAT flat rate, annual accounting, cash accounting, or Tour Operators' Margin Scheme (TOMs).

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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.

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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.

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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. Also, have a look at this general article about Bad Debt Relief.

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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 accounting allows you to defer the payment of import VAT to the moment of submitting your VAT return.

Normally, import VAT is paid to the Customs 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, instead of paying VAT at Customs. 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.

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 UK VAT return applying 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 7: 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.

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Customs warehouse and VAT warehouse

The UK has different customs warehouses, however, there is no specific VAT warehouse arrangement.

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. Find more information here.
• 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. Find more information here.

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Cash Accounting Scheme 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 £1.6 million.

Find more information about the VAT margin schemes in UK.

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UK Reverse Charge

UK reverse charge for non-established companies

We refer to domestic reverse charge for non-established companies when we speak about supplies made by a foreign non-established company of goods that are located in the UK at the moment of the sale. We also refer to this reverse charge in case of a supply of services made by a foreign business when such supply is located in the UK according to special place of supply rules (e.g. services related to immoveable property, catering, or others).  

The UK has only introduced a domestic this reverse charge on supplies of services located in the UK.

Where a non-established supplier provides services to a UK business, it is not relevant if the supplier is registered or not.

More information about the scope and VAT treatment of this reverse charge can be found in the online materials published by HMRC.

In case the services supplied by a non-established supplier fall within the scope of construction services as defined by HMRC, you should look at reverse charge on construction services. Special rules apply for this type of reverse charge.

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Reverse charge on B2B services in UK

UK businesses receiving services from a non-UK supplier will normally account for VAT under the reverse charge mechanism.

As long as a) the place of supply is the UK, b) the supplier is established outside the UK, c) the client is a UK VAT registered company and the supply is not exempt, reverse charge will apply on these purchases of services.

Among these exceptions, a) place of supply in the UK is often the most controversial.

There are however scenarios in which the place of supply will not be the UK even if a non-UK supplier is supplying services to a UK business client. We refer to these scenarios as exceptions to the general B2B rule, and they include:

• Services connected to immoveable property are located where the property is located.
• Passenger transport services will be located where the transport takes places (apportioned if necessary).
• Catering services are located where the catering takes place.
• Short term leasing of means of transport are located where the vehicle put at the disposal of the customer.
• Access to conferences, fairs and exhibitions is located where the event takes place.

More information on the general B2B rule is available in the online information published by HMRC.

You can find more information about reverse charge on services from abroad in this notice published by HMRC.

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UK reverse charge on specific goods

Domestic reverse charge may also apply on certain goods and services in the UK. The conditions and scope change for each type of goods. This regime is often introduced on products that are likely to be used for carousel fraud purposes.

This type of reverse charge applies to mobile phones, computer chips, gas and electricity and emission allowances. In all cases, the customer must be VAT registered in the UK. It does not matter if the supplier is VAT registered or not. There are further conditions about the scope for each kind of supply:

• Mobile phones: This includes accessories sold as a package and any device used as a mobile phone. For more information about the definition, please see  notice 735. There is a de minimis threshold of £5,000 for reverse charge on mobile phones to apply. This limit is calculated on an invoice basis and once exceeded, the reverse charge amount is the full invoice amount (the first £5,000 are not excluded).
• Computer chips: This includes all computer chips falling in the commodity code: 8542 3190 00. This excludes laptops, desktops, servers and similar units.
• Gas and electricity: This applies to wholesale supplies of gas and electricity between counterparties based in the UK. More information about the scope is available in section 3.4 of Notice 735.
• Emission allowances: This refers to those compliance market credits which can be used to meet obligations under the EU Emissions Trading Scheme (EUETS).
• Telecommunications services: reverse charge applies to domestic supplies of telecommunications services, including satellite services between counterparties established in the UK.
• Construction services: reverse charge applies on most supplies of construction services in the UK. The conditions, scope, and way of accounting for VAT are explained in the notice published by HMRC about reverse charge in construction services. Reverse charge on construction services does not apply if the client is considered an end user. A business is considered an end user when it receives construction services but does not make an onward supply of such services. Non-established entities should evaluate if they fall within the category of end users.

Reverse charge on construction services in the UK is linked to Construction Industry Scheme (CIS), a type of withholding tax applicable in the UK. Businesses receiving and providing construction services should evaluate their CIS obligations in addition to the scope of reverse charge for VAT purposes.

Regarding your invoices, they should comply with all UK invoice requirements. VAT will not be charged on the invoice. Instead, a reference to reverse charge should be stated. The following legend is suggested by HMRC:

Customer to account to HMRC for the reverse charge output tax on the VAT exclusive price of items marked reverse charge.

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UK use and enjoyment rules

Use and enjoyment rules can deviate the place of supply rules according to the country where the service is effectively consumed. This article explains the meaning and scenarios on which use and enjoyment tules apply.

The UK introduced positive and negative use and enjoyment. That is, when certain services are delivered by a UK business but consumed outside of the UK, the place of supply would be deemed to be outside the UK (positive use and enjoyment). Similarly, when services are supplied by a UK business and consumed in the UK, those services are deemed to be located in the UK (negative use and enjoyment).

The following services are in scope: telecommunication services, broadcasting services, electronically supplied services (to business customers), hired goods and hired means of transport (both B2B and B2C), and repairs to goods under an insurance claim (B2B).

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Reverse Charge Sales Listing (RCSL) in the UK

With effect from 1 July 2022, if you make supplies of mobile phones or computer chips, you are no longer required to notify HMRC and submit a regular Reverse Charge Sales List (RCSL) using the RCSL system.

Up until 30 June 2022, the UK authorities required a specific return to be filed by businesses supplying mobile phones or computer chips that are subject to domestic reverse charge on specific goods. In consequence, June 2022 is the last reporting period that needs to be reported under Reverse Charge Sales Listing.

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UK Distance sales. VAT on e-commerce

UK Distance sales. VAT on e-commerce

The VAT rules for the e-commerce businesses selling in the UK depend on the location of the goods and the use (or not) of a marketplace to sell your products.

There are different scenarios, so we listed all these situations to help you determine what exactly needs to be done by your business when selling only in the UK.

Skip through the text and check our summary table on the applicable rules for e-commerce sales in the UK.  This article is referring to the UK in general, but special rules apply on sales to Northern Ireland.

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You use Amazon or another marketplace

You will be using a marketplace if another platform takes care of the order, payment and terms and conditions for you. In this case, the marketplace takes additional responsibility for your sales. There are two possible scenarios.

You ship goods from abroad into the UK

If you are a foreign non-UK online seller and your UK client makes an order via an online platform, the rules will depend on the value of your sale.

• Sales below 135 GBP: The marketplace is the deemed supplier. This means that, for VAT purposes, you will sell your goods to the marketplace and, subsequently, the marketplace will charge VAT to the final client. It is the marketplace who is responsible to account for and pay UK VAT. You do not have to register for UK VAT, nor to clear import VAT at customs.
• Sales above 135 GBP: You pay VAT at importation, clear customs and charge VAT on your sales to your customer. You will need a VAT registration and your transport company (or someone else locally) should act an indirect representative for customs purposes. You will also need to need to submit VAT returns. Our step by step guide on importing goods in the UK and our article on import VAT accounting can help you. As an alternative, you can have your customer paying VAT and customs duties “at his or her door” so you would avoid the obligation to register.

The value is calculated based on the cost of your parcel. So if you ship more than one product, you will need to add up to the total cost of the shipment.

If you are selling to a VAT registered customer via an online marketplace and the value is below 135 GBP, the marketplace will not charge VAT. Reverse charge applies in these cases.

The low value exemption of 15 GBP does not apply since December 2020.

Your goods are in the UK at the moment of sale (eg. Inventory in the UK)

You will make a deemed sale to the marketplace, who will then charge VAT to the final client. This rule applies irrespective of the value of the products.

Because you already hold stock in the UK, you would have imported those products and cleared customs previously, so you will need to complete all customs documentation, get a UK VAT number to recover import VAT and report zero-rated sales on your UK VAT return.  

If the client is a VAT registered company, the seller will need to account for VAT and report this sale as output VAT on his or her VAT return.

If you are an Amazon seller, read the Amazon guide about this topic in your seller account.

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You sell via Amazon or another marketplace

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You use your own website to sell your products (no marketplace)

You ship goods from abroad into the UK

If you are a foreign non-UK online seller and your UK client makes an order via your own website, the rules will depend on the value of your sale:

• Sales below 135 GBP: No import VAT is due. You will charge UK VAT on your sale and account for this supply on your UK VAT return. You will still need a simplified customs declaration and a VAT registration to account for these sales. You will also need to appoint an indirect representative for customs purposes.
• Sales above 135 GBP:  You pay VAT at importation, clear customs and charge VAT on your sales to your customer. You will also need a VAT number. Read our article on how to import goods in the UK and our import VAT accounting explanations to help you prepare your VAT return.

Your goods are in the UK at the moment of sale (eg. Inventory in the UK)

You will import the goods and clear customs at importation. You will then charge VAT on your sales to your clients made from your UK warehouse. To do so, you will need a VAT registration and to appoint an indirect customs representative.

Your sell via your own website

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More information about e-commerce rules in the UK

HMRC and the UK government published several notices and manuals about e-commerce rules for UK and foreign sellers.

• This manual explains the rules on VAT and overseas goods sold directly to customers in the UK.
• If you are using an online marketplace, you can find more information here: VAT and overseas goods sold to customers in the UK using online marketplaces.
• This manual explains the rules for overseas businesses selling goods online to Northern Ireland.

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VAT returns in UK

Frequency of UK VAT returns

As a general rule, VAT returns are filed quarterly in the UK.

Monthly VAT returns can be requested by the taxpayer in case of regular repayment traders (e.g. Frequent exporters). HMRC may also ask a business to make monthly payments on account. These payments are advanced payments that are deducted from the overall quarterly payment when filing the quarterly VAT return. payments on Account are mandatory for businesses with a VAT liability exceeding £2.3 million.

In the UK, the quarterly period does not always follow the calendar quarter. Businesses will choose their quarterly period when registering for online VAT services.

Annual VAT returns are allowed when your taxable turnover is below £1.35 million. The Annual VAT Accounting scheme requires advance payments throughout the year. Only one return is submitted for the complete 12-month period, this return may require a payment or a refund depending on the advance payments made during the year.  More information on Annual VAT accounting is available in the online information published by the authorities.

Frequency of filing

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VAT return due dates in UK

You should check your VAT return submission and payment deadline in your HMRC online account. As a general rule, the due date to submit and pay VAT returns in the UK is the 7^th day of the second month following the reporting period.

More information about the applicable deadlines is available here.

Businesses on the Annual VAT accounting scheme have different deadlines. These deadlines are published by the tax authorities.

Also, those businesses on the Payments on Account scheme have different deadlines. You can check them in the online information published by the authorities.

If the due date falls on a Sunday or bank holiday, the date is shifted to the previous working day.

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UK VAT payments

VAT payments in UK can be made using different systems. The tax authorities accept BACS, CHAPS, direct debit, credit card or payments through online telephone banking. The bank details change depending on the method used. Taxpayers should also take into account the applicable delays until the payment becomes effective, as there is a risk of late payment due to this delay.

Non-established companies will often make payments from an overseas account. The details to be used for these payments are the following:

• IBAN number: GB36BARC20051773152391
• BIC Code: BARCGB22
• Account holder: HMRC VAT
• Bank address: Barclays Bank PLC; 1 Churchill Place; London; E14 5HP; United Kingdom.

The reference to be included when making VAT payments from an overseas bank account is the VAT number of companies. You should double check the above information before making a payment to HMRC.

You can find more information about tax payments in UK in the guidance published by HMRC on VAT payments.

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UK VAT refunds

VAT repayments are automatically refunded by the UK tax authorities into the UK bank account of the company. It is not possible to carry forward a VAT credit to the next reporting period. Normally, it takes around 30 days to get a VAT refund from the day the VAT return is submitted.

In the past, a UK bank account was mandatory to get your refunds via bank transfer. In case you did not have a UK account, HMRC would issue a check in the name of the company that can be cashed in an overseas bank account. If this check cannot be cashed, the business would need to open a UK bank account to get the VAT refund. Very often, these non-established companies face issues to receive and cash the cheques issued by HMRC.

In November 2021, in order to ease this procedure, HRMC published an update on this procedure so it is possible for non-established businesses to obtain a refund in their foreing bank account. In order to benefit from this update, a form providing the bank account details of the company must be submitted. Once done, next time your company is in refund position, tax authorities will send an electronic repayment order instead of the old paper check.

The tax authorities may ask additional questions or carry an audit before accepting a repayment. In these cases, the VAT refund would be delayed.

Finally, when your VAT refund is not reimbursed within the regular timeframes, HMRC must pay a repayment interest, added to the VAT refund amount. This interest is calculated from the day your payment is overdue to the day your payment is made in full. Late payment interest is calculated as the Bank of England base rate plus 2.5%. Find more information from HMRC on the repayment interest here.

More information is available in the online guidelines published by the authorities , and under the following link to the update announced by HRMC.

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UK nil and corrective VAT returns

A nil VAT return needs to be submitted even if there are no transactions to be reported for that period.

Regarding corrections, there are two ways to correct your VAT returns:

• Method 1: Adjusting the error in your current VAT return. This method can be used if the net value of your error does not exceed £10,000 or the error is between £10,000 and £50,000 but does not exceed 1% of box 6 for the current period.
• Method 2: Submitting a corrective return with the form VAT652 or sending a Voluntary Disclosure (Error Correction Notice) to the competent tax officer. This method is mandatory if the net value of your error is between £10,000 and £50,000 and exceeds 1% of the box 6 amount for the current period during which the error is discovered or, in any case, if the error is greater than £50,000

More information on how to correct your VAT return is available in the VAT notice published by HMRC on VAT return corrections.

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VAT penalties in UK

The following table summarizes the VAT penalties regime in the UK:

If any other purchase under the reverse charge mechanism is missed, the UK authorities will normally not apply any penalties.

Additional penalties may be charged by the authorities, particularly in case of fraud.

For penalties on Intrastat and other returns, please see the relevant section.

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UK Tax authorities contact

UK has a dedicated department for non-established companies. All VAT registrations for these businesses, as well as other VAT matters, are handled by the Non-established Taxable Persons Unit (NETPU).

Ruby House
8 Ruby Place
Aberdeen
AB10 1ZP
Scotland

Email: vrs.netpu@hmrc.gsi.gov.uk

Teléfono: +44 3000 527458

Established businesses should check in their VAT registration certificate the office that has been allocated to the company.

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EC Sales List UK (ESL returns)

As of 1 January 2021, the UK is no longer a part of the European Union due to Brexit. Therefore, there are no more intra-Community movements between the EU Member States and the UK. These transactions are regarded as imports and exports. However, Northern Ireland is subject to a special VAT regime, and ESL returns are still applicable for the movements of goods between this territory and the EU.

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Due date and frequency of filing of NI ESL returns

The supplies of goods B2B from Northern Ireland to an EU country must be included in the European Sales List (or ESL) return. This also includes triangular transactions or movement of own stock to an EU country.

The ESL return must contain the following information: details of the EU customers, the value of the goods in GBP, the customer's country code.

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ESL returns may be submitted in paper form, or online. The deadline for paper ESL return submission is 14 days following the reporting period, while the online ESL returns must be submitted within 21 days following the reporting period.

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Nil and corrective NI ESL returns

Nil ESL returns are not due.

You need to correct your ESL return when:

• the error exceeds the amount of GBP 100
• you have included an incorrect VAT number
• you have included an incorrect type of transaction

If you need to correct an error in your online ESL return, you can do so within 21 days of submitting the original declaration. After that time frame, HRMC might send you a VAT104 form, this is, an ESL error report.

If you need to correct an error in your paper ESL return, you can do so by sending a VAT101B form to the indicated address.

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Penalties for late NI ESL return

Penalties may apply in case of late submission of an ESL return. This is also the case of ESL returns submitted containing a material inacuracy.  Here you can check the daily rate civil penalty applicable.

Before imposing a penalty, a penalty liability notice must have been issued within the previous 12 months.

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UK Intrastat returns

Intrastat returns are EU reporting obligations and, as a general rule, they are only required in the EU Member States.

Following the exit of the UK from the European Union, HMRC announced that Intrastat returns will be gradually phased out.

Intrastat returns are no longer due concerning the movement of goods between Great Britain (England, Wales and Scotland) and the EU. Exports will be recorded via HMRC using export declarations submitted by all taxpayers moving their products outside Great Britain. However, Intrastat returns will be due concerning the movement of goods between Northern Ireland and the EU.

Intrastat returns remain due only for the movement of goods between Northern Ireland and the EU countries.

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Frequency and due date of NI Intrastat

Like in most EU countries, NI Intrastat returns are filed monthly.

The due date to file these returns is the 21^st day of the following month. If this due date falls on a Sunday or public holiday, the date is shifted to the previous working day.

In case a business is submitting VAT returns with a non-standard VAT period, the reference period for their Intrastat return can be either the month when the goods arrived or the month when the tax point occurs.

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NI Intrastat thresholds

The following annual Intrastat thresholds apply in NI (calendar year):

These thresholds are computed annually according to the calendar year. Once filed, a calendar year needs to be completed by a business in order to stop filing these returns. For example, if a company exceeds the threshold in March 2022 on arrivals, Intrastat returns for arrivals are due until December 2023. These thresholds are calculated according to the invoice value.

Once a business has exceeded the applicable threshold, they need to submit an Intrastat return. If you need help from HMRC you can send an email to intrastatenquiries@hmrc.gov.uk.

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Specific NI Intrastat scenarios

Very often, the transactions reported in the Intrastat return are standard sales from one taxable person to another. However, a number of less common scenarios have specific reporting requirements.

These scenarios are reported by specific nature of transaction codes. These codes are made up of two digits, the first one providing general information and the second one, if applicable, giving more details about the specific scenario.

HMRC publishes detailed guidelines about your Intrastat return,  section 6. How to complete your Suplementary Declaration provides all possible scenarios for your nature of transaction combinations.

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NI nil and corrective Intrastat returns

If no transactions are to be reported, a nil Intrastat return should be filed. HMRC regulations do not foresee this specific requirement; however, it is recommended to submit nil returns in case no transactions have been made in that reporting period.

Also, if you do not expect to have any further transactions to be reported in Intrastat during the calendar year, it is possible to send an email to HMRC (intrastatenquiries@hmrc.gov.uk) who will, as a concession, input nil returns on your behalf.

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Corrective Intrastat returns

Mistakes in your originally submitted Intrastat return need to be corrected using the Intrastat Amendment form.

An amendment form is however not required to update the country from/to, commodity code, value or wrong period if the value of the error on a single line is below £10,000.

More information about corrective Intrastat returns and the applicable form to be used is available in the guideline published by the authorities about this subject.