VAT in The United Kingdom

The United Kingdom (UK) left the European Union (EU) on the 31st January 2020, however it will retain the EU's VAT rules as a part of the UK's transition agreement with the EU, until 31st December 2020.

The EU and draws up its tax rules according to the laws or directives issued from Brussels, which the UK currently subscribes to. The current VAT directive also applies to all 27 member states of the European Union, and it governs the rules on VAT compliance, and in some part, covers the setting of VAT rates.

The UK is obliged to implement the VAT directives, which provides guidance on VAT under its withdrawal agreement with the EU. Where there is a conflict, the European Union’s directive takes precedence. The UK is not a member of the Eurozone and uses its own currency, the British Pound (£ or GBP).

VAT registration in the United Kingdom

Both EU and non-EU businesses may trade in the UK without establishing a local presence. This is known as non-resident VAT trading. There is no VAT threshold in the UK for the registration of non-resident traders, but you will need one to record transactions and your British customers will want proof that you have obtained one.

There are strict rules on the situations where VAT registration is permitted. Common scenarios that require UK VAT registration include:

• Importing goods into the UK;
• Organising live events, conferences, etc. in the UK;
• Holding goods in a warehouse in the UK as stock for resale;
• Buying goods within the UK that are subsequently re-sold in-country;
• Selling goods from the UK to other EU member states;
• Distance-selling to private individuals in the UK, e.g. internet retailing or trading through an e-commerce platform.

Registering for UK VAT generally takes up-to a week once all documentation has been submitted to the tax authority, but this varies from seller to seller and will depend on the specifics of an individual company.

UK VAT compliance

There are detailed rules controlling the recording and processing of UK transactions for VAT purposes. This includes guidelines on:

• UK invoice requirements;
• When to issue a UK tax invoice;
• Foreign currency reporting;
• Credit notes and corrections;
• Correcting entries from prior returns;
• Which accounting records must be maintained.

United Kingdom VAT rates