Even as trade agreements are being announced after BREXIT, some businesses outside the UK and EU are wondering how to register for “Value Added Tax”. For start-ups and new businesses, you might be envisaging entering into the U.K. market and wonder what you need to achieve your goal of expanding into this new market.
Value Added Tax (VAT) is a common item that is seen on many bills and receipts. However, if you’re looking to expand into the U.K., you are probably asking yourself whether VAT registration is relevant to your business. How can non-EU companies register for VAT? When should you register for VAT? How long does the process take and where can you get the VAT registration form? These are the common questions asked by businesses every day.
In this article, we’re going to look at what VAT is, how to register for VAT as a non-EU company as well as your eligibility and the registration process for your business. We will equally tell you about the requirements and conclude with some frequently asked questions about VAT in the UK. Armed with this information, you will be able to make the right decisions that will enable your business to grow.
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What is a Value-added Tax?
The term VAT, an acronym for Value Added Tax is a percentage of the price that consumers pay when they purchase specific goods or services. The VAT rate has been 20% in the U.K. since January 2011 and is periodically updated in the budget by the UK Chancellor of the Exchequer. Some goods are exempt from this tax; for example, children’s clothing and footwear, which have a zero rate for VAT. It is usually assumed that all businesses charge VAT, so it’s no wonder that many people who contact us about starting a business expect they’ll need to register with Her Majesty’s Revenue and Customs (HMRC) for VAT.
Why do Overseas Non-EU Companies Need It?
Not all foreign companies are obliged to have a U.K. VAT number. VAT registration for non-EU companies is necessary for some circumstances, which include;
If the company importing a product is VAT registered, such VAT can be reclaimed while import payments can also be postponed. However, VAT registration is not necessary where a non-EU company is not supplying goods to the UK.
What is the VAT threshold?
Businesses should only register for VAT if their annual turnover in the last 12 months or the next thirty days is larger than the current VAT threshold of £85,000. Any turnover above this threshold can be taxed by HMRC.
How can you register for VAT in the UK?
Most non-EU companies, including partnerships and groups of corporations filing under one VAT number, can register online. You’ll be able to register for VAT and create a VAT online account (also known as a “Government Gateway account”). This is required to submit VAT returns to HM Revenue and Customs (HMRC).
Using an agent
You can equally hire an accountant (or agent) to handle your VAT returns and dealings with HMRC. You can sign up for a VAT online account and choose the ‘VAT submit returns’ option once you have your VAT number from HMRC.
How Long does the VAT registration process take for non-EU companies?
The time it takes to process a VAT registration in the United Kingdom is usually relatively short. A VAT number for a non-UK firm typically takes three to six weeks to be issued.
VAT registration is necessary for non-EU companies that supply goods into the UK. However, you should only register for VAT if your taxable turnover is more than £85,000 in the next 30-day period or over the last 12 months. It is important to realize when it might be necessary to go through a VAT registration as this is not always necessary. However, the bulk of non-EU companies exporting into the UK should verify if their turnover exceeds or falls under the threshold. You may be an e-commerce start-up, auto dealer, or agricultural export company based outside the EU. To export successfully, you are required to meet all the guidelines of the U.K government and HMRC. This article provides you with a roadmap to enable you to make the best decisions for your business.
The UK tax authorities demand specific information about the firm, including how and where it trades, to process a VAT registration application. The company will have to reveal if it has a presence in the UK or if it operates from a non-UK headquarters in Germany, the United States, or France, for example. the applicant for VAT must be a company director and must provide personal identity information as well as details of prior and current UK VAT registrations with which they are affiliated.
Register by post only if you are an EU business selling to Northern Ireland (VAT1A), you import goods into Ireland worth over £85,000. Non-EU businesses do not need to get any forms that require them to apply by post.
In order to complete your VAT registration, you need to own a U.K. bank account. This applies especially to non-EU businesses. Without this, it will be impossible to complete your application.