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UK VAT Hacks

When the United Kingdom broke away from the European Union in 2021, all hell broke loose from a VAT and customs perspective. Suddenly the country was no longer part of the customs union, which meant that the movement of goods between the UK and EU became much more complicated.

For all businesses trading with the UK, there were also new VAT compliance rules to consider, as the country updated its legislation to be independent of the EU, but also mirrored a lot of the EU VAT framework.

UK VAT Compliance – Rates & Registration

If a company not established in the United Kingdom is providing ‘taxable supplies’ of goods or services in the UK, it may have to obtain a non-resident VAT registration. Foreign traders are legally obligated to register for VAT in certain circumstances in order to report taxable transactions and declare VAT that must be charged. It is important that all businesses with any commercial activity in the UK assess their compliance obligations and register prior to commencing taxable transactions if applicable.

Have a look at our Brexit Page to learn more about the specific VAT implications of Brexit.

When do I need to Register for VAT in the UK?

There are various scenarios that would trigger an obligation to register for VAT in the UK.

Some of the most common examples are:

  • Importing goods into the UK where your business acts as the importer of record.
  • Buying and selling goods in the UK.
  • Selling goods from the UK which are delivered to customers outside of the UK (business or private customers).
  • Holding inventory in the UK for sale, distribution or consignment.
  • Drop shipping goods valued below £135 to customers in the UK.
  • Organising events in the UK where attendees or delegates must pay admission.

UK VAT Rates & Registration Number Formats

VAT Number Format VAT Rate (Standard) VAT Rate (Reduced) VAT Rate (Zero)
GB 123456789 20% 5% 0%

Drop Shipping Low Value Goods

If goods located outside the UK with intrinsic value of less than £135 are sold directly to UK customers: VAT must be charged at the point of sale. Those are the new UK VAT rules as of 2021.

What does it mean? Since the VAT charged is now UK supply VAT rather than import VAT, the seller is now automatically required to register for UK VAT.

Selling into the UK via an Online Marketplace

The scenario above refers to e-commerce suppliers selling through their own digital store. However, many online sales take place via an online marketplace (OMP), such as Amazon or eBay. UK authorities have instituted special rules governing the sale of imported low value goods sold through an OMP. In those cases, the marketplace itself must account for and manage VAT. In other words, the responsibility for accounting for VAT shifts from the underlying seller to the OMP.

This also applies to non-UK businesses who sell goods that are stored in the UK via an OMP – the marketplace is responsible for the VAT, but in this instance, the underlying is legally obligated to register.

Postponed Import VAT Accounting (PIVA)

If you are importing in the UK and act as the consignee, you will be responsible to pay import VAT. Post Brexit, this applies to imports from the EU as well. Import VAT is recoverable, but it can be a cash flow burden to have to wait to recover it. VAT registered companies that import into the UK can gain cash flow relief by using Postponed Import VAT Accounting (“PIVA”).

VAT return periods

Monthly or quarterly

Extended reverse charge

Services provided by a non-established to a VAT registered customer in the UK are subject to the reverse charge and the customer accounts for the VAT. Please contact us if you would like details of how the extended reverse charge applies in the UK.

Fiscal Representation

The tax authority may require the appointment of a tax representative where the business is established in a non-EU country with no mutual assistance arrangements with the UK.

Contact us for a complimentary consultation.

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