Registering for UK VAT if you’re outside the UK

You and your business are based outside the UK, and selling goods or services into the UK. Does VAT apply to you?

Firstly what is VAT?

This is Value Added Tax, and added to sales, usually at the rate of 20%. So if you’re selling a product for £100, you would add 20% VAT, and charge £120 to your customer.

You can also claim VAT back on costs the business incurs where VAT is charged, but the rules are quite complex!

More on VAT, and registering for VAT here. But for this blog, we’re just going to stick with the rules around non-UK businesses, selling into the UK.

Also lots of guidance from HM Revenue and Customs here.

Who has to charge VAT?

UK Businesses:

with a VATable turnover of over the VAT registration threshold of £90,000 (at April 2024) have to register for VAT, and charge VAT to their customers.

UK Businesses can also voluntarily register for VAT if their turnover is below the registration threshold. Check out our blog on registering for VAT for the benefits of doing this.

Non-UK Businesses:

If you and your business are based outside the UK, and selling into the UK, you also have to charge VAT, and this blog relates to you.

Non-Established Taxable Persons (NEPTs)

A non-established taxable person is someone who is not normally resident in the UK, and doesn’t have a UK establishment.

In the case of a company, they are not incorporated in the UK.

And making taxable supplies (sales of goods or services) in the UK

What counts as a UK establishment?

This is where essential management decisions are made, and where the business’s main admin is carried out.

It is also a permanent physical presence in the UK, with human and technical resources to make and receive taxable supplies within the UK.

If you don’t have a UK establishment, then you are likely to be an NEPT.

When does an NEPT have to register for VAT

Normally UK businesses have a VAT threshold for registration. UK businesses only register for VAT if their turnover is above this threshold in any previous 12 month period. More info on thresholds and registering here.

UK businesses can also voluntarily register for VAT, if their turnover is below the VAT registration threshold.

However, NEPTs must register for VAT if they make any taxable supplies in the UK. The threshold does not apply to NEPTs.

New ruling from 1 December 2012

This new ruling removing the VAT threshold for NEPTs came into force on 1 December 2012.

There are some circumstances where you may not be aware of this ruling.

Backdating your VAT registration

If you have been making taxable supplies at any date from 1 December 2012 onwards, but have not registered for VAT, your VAT registration will be backdated to 1 December 2012, and your first VAT return will be for the period from 1 December 2012, or the date you started selling to the UK, if this is later.

You may be able to arrange time to pay with HM Revenue and Customs for the VAT due for this first period, as it may be significant.

Penalties for registering late for VAT

If HMRC decide you have registered late for VAT, there may be a penalty due, based on a percentage of the VAT due for this period.

The penalty depends on how late you were to register for VAT:

  • less than 9 months late: 5%
  • 9 to 18 months late: 10%
  • more than 18 months late: 15%

Tax representatives for NEPTs

You can appoint a tax representative to manage your VAT affairs in the UK. Please note – this is not the same as your accountant or bookkeeper.

A tax representative is legally responsible for:

  • must keep your VAT records and accounts and account for UK VAT on your behalf
  • is jointly and severally liable for any VAT debts you incur

Your bookkeeper or accountant does not need to be appointed as your tax representative in the UK, and will not normally be jointly and severally liable for your VAT debts.

However, your bookkeeper or accountant can support you in your legal responsibilities, if you appoint them to:

  • manage your bookkeeping, and
  • submit your VAT returns on your behalf

More info on tax representatives from HMRC here.

Registering for VAT as an NEPT

You can register for VAT here, and will need to complete additional forms as requested by HMRC, including an Overseas Traders VAT Registration Questionnaire, and provide proof that you are trading in the UK.

What next?

We manage the UK VAT affairs of NEPTs, and have successfully completed backdated VAT registrations and VAT returns, liaising with HMRC on your behalf.

In one case we saved our client over £17,600 in VAT at 55% of the original amount due, using our expert knowledge of the UK VAT regime, and different VAT schemes available.

Do get in touch if you’d like our support to guide you through the minefield of UK VAT law!