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.
Register for a VAT Number: 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:
- When goods or items are imported into the U.K. and sold there.
- Where sellers from outside the UK sell low-value items in the UK, the e-commerce platform where the goods are sold may be required to register for VAT and disclose the output tax for these transactions on behalf of the seller.
- If you keep stock in the UK and sell it to UK clients, you may equally be required to register for VAT.
- Goods imported from outside the UK are subject to VAT and import charges at the time of entry.
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”). To submit VAT returns to HM Revenue and Customs (HMRC), is required.
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.
Frequently Asked Questions
What are the VAT registration requirements in the UK?
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.
Should I get a VAT registration form?
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.
Is it possible to do VAT registration if you do not have a U.K. bank account?
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.
