If a non-UK company is importing, buying or selling goods in the UK, it may be liable to account for UK VAT including the following compliance and reporting obligations.
Foreign businesses may be required to register for UK VAT in certain trading situations including amongst others, the following:
- Importation of goods into Europe via the UK;
- Buying and trading goods in the UK;
- Selling goods to UK consumers through the internet;
- Holding stocks of goods on consignment in the UK, prior to onward sale to other businesses in the UK or abroad.
The UK rarely requires foreign companies to VAT register if it is only providing services within the UK. The European place of supply rules are outside the scope of this short publication.
Importation Of Goods Into Europe Via The UK
If your company is importing goods into the European Union (EU), then you are likely going to have to navigate complex rules on VAT compliance and charging depending upon on the type of goods, the countries involved and whether all the parties in the chain are VAT registered or not.
Imports Charged With VAT
For the purposes of EU VAT and customs, bringing goods into the EU for the first time from another non-EU country is termed an import. Generally, the country of arrival will look to charge its standard VAT rate (e.g. UK at 20%) on the import transaction. This liability must be settled before the release of the goods from customs. Once paid, the goods are then in 'free circulation' and may be stored and sold or sent to another EU country. In order for the liability to be settled, a valid VAT registration number will be required.
Intra-Community Supplies Are VAT Zero-Rated
Once in free circulation and goods are being moved from one EU country to another, then there is no requirement to charge any VAT subject to the satisfaction of certain important conditions which include:
- the existence of valid VAT numbers on both sides;
- checking validity of VAT numbers;
- noting of customer’s VAT number on sales invoices; and
- possession of documentary proof of cross border movement of goods.
However, if the sales are to customers who do not have a valid VAT number, or you are selling to individual consumers, then you must charge the VAT rate of the country of dispatch.
Buying & Trading Goods In The UK
A UK based trader must register for UK VAT when their taxable supplies exceed the threshold, or know that they will. The threshold is based on the traders VAT taxable turnover which is the total of all sales that are not VAT exempt.
VAT registration must be made on a compulsory basis where:
- The traders VAT taxable turnover exceeds £85,000 (£83,000 to 31 March 2017) (the ‘threshold’) in a 12 month period.
- Or the trader expects to go over the threshold in a single 30 day period
- A non-established taxable person (NETP)
- A NETP must register for VAT in the UK and account for UK VAT to HM Revenue and Customs if they make any taxable supplies in the UK. There is a special registration process.
A NEPT may voluntarily register in the UK and claim back any VAT they have been charged in the UK if they intend to make taxable supplies in the UK more than 30 days in the future.
Pearse Trust’s dedicated VAT team are on available to assist with any UK VAT registration and compliance matters which you may encounter in the conduct of your business.
Disclaimer: This blog reflects a ‘snapshot’ overview of the UK VAT registration regime only. The blog is intended to bring this development to the reader’s attention and to alert to the publication of the HMRC guidance in this area. As with all technical tax matters, specialist advice should be sought in relation to the interpretation and application of these rules.