VAT Registration and Filing

UK Value Added Tax (VAT) is an indirect tax levied on the added value of goods and services.

Registered businesses must collect VAT from customers during eligible transactions and remit it to HMRC.

VAT rates vary depending on the type of goods and services. The main VAT rates are:

Standard Rate (20%): Applies to most goods and services, such as electronics (e.g. mobile phones, computers), clothing and footwear (except children's clothing), restaurant and takeaway food (excluding cold food), alcohol, and tobacco.

Reduced Rate (5%): Applies to specific goods and services, such as domestic energy and children's car seats.

Zero Rate (0%): Applies to essential goods like food, children's clothing, and books. Businesses must still record sales and submit VAT returns.

Exempt Supplies: Certain financial services, education, and healthcare services are VAT-exempt, meaning businesses do not need to charge or report VAT on these transactions.

Do I Need to Register for VAT?

You must register for VAT if:

Your taxable turnover in the past 12 months exceeds the £90,000 VAT threshold.
You expect your turnover to exceed £90,000 in the next 30 days.

Additionally, you must register for VAT regardless of your taxable turnover if:

You are based outside the UK.
Your business headquarters are outside the UK.
You supply any goods or services to the UK (or plan to do so within the next 30 days).

Businesses based in the UK trading below the threshold can choose to register voluntarily in order to reclaim input VAT.

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How to Register for UK VAT?

What Documents Are Required?

Business name, registered address, company registration number (if a limited company), company bank account details, and Unique Taxpayer Reference (UTR) (if a sole trader or limited company based in the UK).

Company Details

1

Turnover records for the past 12 months or projected turnover for the next 12 months to determine whether VAT registration is mandatory or voluntary.

Proof of Business Activity

2

Name, contact details, and National Insurance (NI) number or passport information (if no NI number is available, a passport or Biometric Residence Permit (BRP) may be required).

Director or Responsible Person’s Identification

3

Bank Account Details

Used to process VAT transactions (e.g. whether VAT is calculated on a cash or accrual basis).

4

Once all required documents are prepared, you can submit an online application through HMRC's website. Processing usually takes up to 30 working days, but this may vary depending on HMRC's review process and the completeness of the application.

After registration, you will receive a VAT registration confirmation letter from HMRC containing your VAT number and instructions on submitting quarterly or annual VAT returns. Your VAT number must be included in all VAT-related transactions and reports.

What is the VAT Filing Period?

Once registered, businesses must submit VAT returns to HMRC, detailing VAT collected on sales and VAT paid on purchases. The deadline for submitting online VAT returns is typically one month and seven days after the end of the accounting period. This is also the deadline for making VAT payments to HMRC.

Even if there is no VAT to pay or reclaim, businesses must still submit a VAT return.

VAT returns can be filed monthly, quarterly, or annually, depending on the business size and preference:

Monthly VAT Returns：

Suitable for businesses that frequently claim VAT refunds, such as exporters.

Example: If filing for April, the VAT return must be submitted by 7 June.

Quarterly VAT Returns

The most common filing period, requiring businesses to submit VAT returns every three months.

Example: If the VAT quarter runs from 1 January to 31 March, the return must be filed by 7 May.

Annual VAT Returns

Available for smaller businesses with an annual turnover below £1.35 million, allowing them to file one VAT return per year.

Example: If the business chooses an annual reporting period ending on 31 December, the return must be submitted the following year.

Penalties

Failure to register for VAT or to file VAT returns on time may result in penalties and fines:

Penalties for Non-Registration

Retrospective VAT Charges: HMRC can backdate VAT liability, requiring businesses to pay VAT on all past transactions that should have been taxed. Late payments may also incur interest and late fees.
Fines: The penalty varies depending on how long VAT registration has been overdue and the sales revenue during the period of non-compliance. The fine can range between 5%-15% of the VAT owed, or higher in severe cases.

Penalties for Late VAT Returns

HMRC uses a points-based penalty system for late VAT submissions.

Each late submission will accrue a penalty point. Once a business reaches the penalty threshold of four points, a £200 fine is issued. Subsequent late filings will then incur an additional £200 fine.

*More details please see here.

VAT Registration for UK E-commerce Sellers

Marketplace Facilitation Rules

From 1 July 2021, the UK introduced new VAT rules requiring online marketplaces (e.g. Amazon, eBay) to manage VAT on behalf of sellers:

Marketplace Sellers: If selling through an online marketplace that meets VAT requirements, the platform is responsible for collecting and remitting VAT to HMRC.
Direct Sellers: Businesses selling directly via their own websites must register, collect, and submit VAT independently.

E-commerce sellers can reclaim VAT on purchases and, in some cases, obtain VAT refunds for exported goods.

With the rapid growth of e-commerce, VAT regulations for UK-based and international sellers are continuously evolving:

UK Domestic Sellers: Businesses selling goods or services in the UK must register for VAT if their turnover exceeds £90,000 in the past 12 months.

Cross-border Sellers (EU and Non-EU Countries):

EU sellers: UK-EU transactions are no longer automatically VAT-exempt, requiring EU sellers to register for VAT in the UK irrespective of sales volume.
Non-EU sellers: must register for VAT if selling to the UK and the order value exceeds £135 (applicable to goods, not services).

Success Stories

Client B: The expert tax advice from TB Accountants resulted in significant tax savings for our business.

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