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.
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.
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:
Taxable transactions, as outlined in Section 1 and Section 4 of the Value Added Tax Act 1994, generally include the following:
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.
|Tax authority||HM Revenue & Customs|
|VAT in local language||Value-Added Tax|
|Currency||£ Pound sterling|
|VAT number format||GB + 9 characters|
|Standard 20%; Reduced 5%;|
|Zero-rated (0%) and exempt|
|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|
|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|
|European Sales Listing||Not Applicable|
Last Updated: 25/08/2023
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