VAT in the UK
The responsibility for overseeing value-added tax (VAT) in the United Kingdom lies with Her Majesty’s Revenue and Customs (HMRC). This authority is granted to HMRC through the Commissioners for Revenue and Customs Act 2005, which grants them the administrative powers necessary to manage and enforce VAT regulations.
Prior to January 31, 2020, the United Kingdom was a member state of the European Union (EU). During its membership, the UK was obligated to incorporate the EU VAT Directive 2006/112/EC, which harmonizes various aspects of VAT legislation within the EU, into its domestic law. Consequently, the VAT Act 1994 and associated UK VAT legislation and regulations reflect these harmonized provisions.
Selling in the UK?
The primary legislation in the United Kingdom regarding value-added tax can be located within the Value Added Tax Act 1994, c. 23, commonly referred to as the VAT Act 1994. The VAT Act 1994 is further elucidated and applied through the Value Added Tax Regulations 1995, known as the VAT Regulations 1995.
To ensure consistent application of the VAT Directive, the Council Implementing Regulation (EU) No. 282/2011 was established on March 15, 2011, providing binding implementing measures. These implementing regulations directly apply in EU member states without the need for national transposition.
Scope of Taxation
VAT, known as Value Added Tax, is a broad-based indirect tax that is typically collected by suppliers and importers at each stage of the supply chain for goods and services. Its design aims to achieve neutrality in two key aspects. First, it intends to tax similar supplies in a consistent manner. Second, businesses are allowed to deduct the VAT they have paid, resulting in the burden of the tax falling primarily on the final customers.
Section 1 of the VAT Act 1994 specifies the transactions that are encompassed by UK VAT. These transactions include:
- Supplies and deemed supplies of goods or services within the United Kingdom: This refers to the provision of goods or services by a taxable person in the course of their business activities in the UK. A taxable person can be an individual or entity that is registered for VAT or required to be registered.
- Importation of goods from locations outside the United Kingdom: This pertains to the act of bringing goods into the UK from places that are situated outside the country’s borders. VAT is typically levied at the point of importation, and the responsibility for paying the tax rests with the importer.
Taxable Transactions
Taxable transactions, as outlined in Section 1 and Section 4 of the Value Added Tax Act 1994, generally include the following:
- Supplies and deemed supplies: This refers to the provision of goods or services within the United Kingdom by a taxable person as part of their business activities. A taxable person is someone who is registered or required to be registered for VAT. These supplies can be either physical goods or intangible services.
- Importation of goods: This involves bringing goods into the United Kingdom from locations outside the country. When goods are imported, VAT is usually payable at the point of entry, and the importer is responsible for paying the tax.
Nevertheless, there are also transactions that are neither classified as supplies of goods nor as supplies of services, and such transactions are not covered by the UK VAT system.
These are:
- Supplies exchanged among members of a “VAT group”.
- Transfer of a “going concern” business.
- Certain supplies which are provided without charge.
- Minor outlays, such as charitable welfare services.
- Voluntary donations to charities.
- Public supplies such as public bridges and road tolls.
UK – General VAT information
| Tax authority | HM Revenue & Customs | |
| VAT in local language | Value-Added Tax | |
| Currency | £ Pound sterling | |
| VAT number format | GB + 9 characters | |
| GB123456789 | ||
| VAT rates
|
Standard 20%; Reduced 5%; | |
| Zero-rated (0%) and exempt | ||
| Thresholds
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| Registration | ||
| Established | GBP 85,000 | |
| Non-established | None | |
| Intra-EU Distance sales and electronically supplied services to consumers (OSS) | None | |
| VAT Group | Allowed – but only for certain conditions. | |
| Voluntary Registration | Available – but not mandatory | |
| Intra-EU Dispatches | ||
| Intra-EU Arrivals | ||
| Recovery of VAT by non-established businesses | Yes | |
| Compliance Returns and Deadlines | ||
| VAT Returns | Last day of the month following the end of the period | |
| Frequency | Quarterly | |
| European Sales Listing | Not Applicable | |
| Intrastat | Not Applicable | |
| Electronic Invoicing |
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Last Updated: 25/08/2023
Disclaimer
The information provided by Global VAT Compliance B.V. on this webpage is intended for general informational purposes only. Global VAT Compliance B.V. is not responsible for the accuracy of the information on these pages, and cannot be held liable for claims or losses deriving from the use of this information. If you wish to receive VAT related information please contact our experts at support@gvc.tax