The basic rule that determines whether you need to compulsorily register for VAT in the UK is simple: If you’re a ‘taxable person’ making ‘taxable supplies’ in the UK above the registration threshold you need to register. But that is to over simply what is otherwise considered an extremely complex system of finding out if you need to register for VAT. If you do, then you need to file a certain form, in most cases online and in some cases in paper form, with HMRC. Registration can take anything from one week to six months depending on the nature and level of further information exchanged between you and the HMRC.
‘Taxable person’ can be an individual (sole traders), partnership or a company etc that is in business. But what complicates the most is the definition of ‘taxable supplies’. Clearly exempt supplies (e.g. medicines) are outside the scope of VAT. Or for that matter even supplies of goods are fairly straight forward in that the place of supply could logically be determined to be where the supplier supplies the goods from. But the internet revolution has meant that services could be delivered anywhere online from anywhere. This has lead to the introduction in 2010 of the complicated ‘place of supply rules for services’. So in order to determine whether a supply is taxable one needs to first determine where the place of supply for that service is. If it is considered to be the UK then one needs to register for VAT.
What we have done below is that we have attempted to decode the complicated rules to simplify as to who should register for VAT in the UK. Please do note that this is for information only and under no circumstances constitute advice which should be sought separately considering your specific circumstances.
Businesses established in the UK will need to register for VAT in the UK if the following apply to you:
a) If you make taxable supplies (both goods and services) within the UK on cumulative basis for the last 12 months in excess of £77,000 or if you expect it to go over that limit in the next 30 days.
b) If you make acquisitions of GOODS from other EU countries exceeding £77,000 when counted on a calendar year basis starting Jan 1 or if you expect to acquire more than that value in the next 30 days alone, you must register for VAT.
c) If you’ve acquired a VAT registered business in the UK you need to add your own VAT taxable turnover over the last 12 months to the turnover of the business taken over and if the total exceeds the current registration threshold of £77,000 then you’ll have to register for UK VAT.
d) If you make taxable supplies of SERVICES to customers based outside the EU you need to register if the place of supply is determined to be the UK and the supplies exceed the registration threshold (e.g. if you’re a lawyer advising a client in Australia about a UK property the place of supply is the UK). Supplies of services to a customer based within the EU are zero-rated if the customer is VAT registered in their country of origin. If the supplier is not VAT registered, the place of supply is held to be the UK and the if the registration threshold is breached then you will need to register for VAT.
e) If you are a business established in the UK that receives SERVICES from outside the UK, the place of supply of such services is held to be the UK, and if the value of the services received by you together with the taxable supplies you make exceed the registration threshold you will need to register for VAT. You will account for VAT using the reverse charge mechanism for services received from outside.
Businesses established outside the UK but within the EU
a) If you are a business established within the EU making taxable supplies of GOODS to customers based in the UK and if the taxable supplies of goods to UK customers who are not registered for UK VAT exceed £70,000 you need to register. This is called distance sales. For registration purposes distance sales are counted from on a calendar year basis from 1 January.
b) If you make taxable supplies of SERVICES exceeding the VAT registration threshold to customers not registered for VAT in the UK and where the place of supply of such services is held to be the UK you need to register.
Businesses established outside the EU
a) If you are a business established outside the EU with no place of establishment in the UK and making taxable supplies of GOODS to customers based in the UK then a you’re a Non-Established Taxable Person (NETP). NETPs making taxable supplies of goods of ANY value will need to register for UK VAT.
b) If you make taxable supply of SERVICES of ANY value to customers not registered for VAT in the UK and the place of supply such services is held to be the UK then you need to register.
How we could help?
As a tax practice we deal with all sorts of clients facing all sorts of situations. So we should be able to:
a) Understand your business structure and advise if at all you need to register
b) Advise you if your products or services are VAT chargeable in the UK
c) Advise you on the ‘place of supply’ for your services
d) Advise you when to register and when not to register to optimise on VAT
e) Help you get registered with HMRC
f) Compute your VAT liability on a regular basis and file your VAT returns
g) Advise on VAT accounting
h) Register with HMRC as your tax advisor in the UK
Please contact us for a free initial consultation.
