If you're based outside of the UK the rules on when you need to register and charge VAT can be complicated. In this post we go through the rules and provide a couple of illustrative examples for the most common scenarios.
Introduction to VAT
Value Added Tax (or VAT) is a tax charged to customers at the point of sale, much like Sales Tax in the US or South Africa, GST in Canada or Australia, etc.
There two main schemes to choose from, a simplified Flat Rate Scheme (which is only available to smaller businesses), and the Standard Rate Scheme where, in addition to charging VAT to customers and paying this to HMRC (our tax authority), you are able to reclaim any VAT from HMRC on any VAT bearing costs your business has incurred.
The rate of VAT charged to customers is based on the type of goods or service sold. The 'Standard' rate (20%) applies to most goods and services but some are 'Zero Rated' (0%) items such as children's clothing, books, coffee. There are two additional categories which rarely apply to ecommerce sellers, namely 'Reduced Rate' (5%) e.g. electricity, and 'Exempt' e.g. insurance.
When do I have to charge VAT?
You must charge VAT on sales from the date you are VAT registered. You can register voluntarily for VAT at any time, but there are some scenarios where you must register. For a non-UK business there are two scenarios where a VAT registration is required.
When do I have to register for UK VAT?
There are two scenarios where a non-UK business has to register for VAT are:
- You are an EU/EEA based company and you either ship goods from the UK or you exceed the UK distance selling threshold of £70,000 in any calendar year (Jan-Dec)
- You are a non-EU based company and you store goods in the UK, e.g. you wish to use Amazon's European Fulfilment Network and choose to use UK based fulfilment centres.
When would I not need to register for UK VAT?
The most common scenarios where you do not need to register are:
- You are based anywhere in the world and the goods are shipped from outside of the EU/EEA and sent directly to consumers in the UK. See our post on VAT for Dropshippers for more information on this point.
- You are based in the EU and your total sales looking back 12 calendar months is less than £70,000
Does it matter who is named as the importer on record?
If you are a non-UK business there are two scenarios for who is the importer on record, either:
- The customer - in which case goods are likely to be held up at HMRC Customs and the customer must pay the import VAT and any duties that apply to receive their goods
- Your business or the logistic / fulfilment provider - in which case goods ship directly to the customer with import VAT and duties paid (which you / logistics company pays)
In neither scenario would you need to register for VAT.
Our UK VAT service
We provide a complete UK VAT returns service with the highest available service level. That means that we will get the required sales and platform fee data for you. You only need to provide us with any VAT bearing costs (if you have any) including import VAT paid. We have a system in place to make the process of uploading this information effortless.
The first step is to establish when to register and which scheme. We will ask you a set of questions, advise you which VAT scheme is appropriate for your business and then prepare and submit the application for you. The process can take up as little as 15 minutes of your time!
We charge £120 + VAT (the VAT portion will be reclaimed if you go on the Standard scheme).
How long does it take to get my VAT number?
HMRC takes 7 - 20 working days to process applications and return a VAT number.
How do I submit returns?
Each quarter, we prepare and submit a VAT return on your behalf to HMRC based on your sales data and any applicable costs in your business. We make these submissions electronically, which is a requirement for complying with with the UK's Making Tax Digital rules for tax filings.
What is the deadline for filing and payment?
Your filing and payment deadline falls 1 month and 7 days after your VAT quarter ends.
How much will it cost?
For a back-of-the-envelope calculation you can use the Flat Rate Scheme VAT rate of 7.5% as the cost figure. However, if you are on the Standard Rate Scheme, which is more common of the two, the real impact will be a function of the profit margin per sale (we'll help you to check these figures).
The costs of our service depend on the level of VATable revenue your business does. You can see these instantly by using our Instant Quote form; just select "Non-UK" as your business domicile and complete the form.
How do I get started?
First complete the Instant Quote form to see how much the service would cost. If the price works and the service is clear, you can click the register link provided there to continue. If you have any further questions, you can use the Contact Us form to get in touch.