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This publication is available at https://www.gov.uk/government/publications/vat-notice-7001-should-i-be-registered-for-vat/vat-notice-7001-should-i-be-registered-for-vat
This notice cancels and replaces Notice 700/1 September 2016. Details of any changes to the previous version can be found in paragraph 1.2 of this notice.
1.1 What this notice is about
This notice tells you when you must register for VAT and how to do it.
1.2 Changes in this edition
Changes have been made to the September 2016 edition to reflect:
- the introduction of new powers which enable HM Revenue and Customs (HMRC) to hold an online marketplace jointly and severally liable for VAT owed by an overseas seller that’s selling goods in the UK via that marketplace
- the power to direct some non-established taxable persons (NETPs) to appoint a VAT representative who is based in the UK and is fit and proper
The Statement of Practice about artificial separation of business activities has been moved.
1.3 Who should read this notice
You should read this notice if you:
- make business supplies of goods or services in the UK regardless of where you live, or where your business is established
- acquire goods into the UK from the EU
- sell certain assets
1.4 Force of law
Section 16 contains images of a number of VAT forms which carry the force of law under Regulations 5 and 10 of the VAT Regulations 1995.
2. Basic principles
2.1 VAT: an introduction
VAT is a tax businesses have to charge when they make business supplies (that is, they sell goods or services) in the UK or Isle of Man.
Examples of business supplies include:
- selling new and used goods, including by hire purchase
- providing a service, for example, hairdressing or decorating
- charging an admission price to go into buildings
- a self-employed person providing supplies, for example, some salesmen and subcontractors
VAT is also charged on:
- goods, and some services, which are imported from places outside the EU
- goods and services which come into the UK from another EU member state
2.2 VAT rates
|Rate of VAT||also known as||applies to supplies of|
|20%||standard rate||most goods and services|
|5%||reduced rate||for example, fuel and power used in the home and by charities, women’s sanitary products (see paragraph 2.5)|
|0%||zero rate||certain goods and services on which you don’t need to charge VAT (see paragraph 2.4)|
2.3 Taxable supplies
A taxable supply is any supply made in the UK which isn’t exempt from VAT. Taxable supplies include those which are zero-rated for VAT.
A supply which isn’t VAT-exempt is always a taxable supply whether or not the person making it is registered for VAT.
However, you don’t have to account for VAT on the taxable supplies you make when both of the following apply:
- you aren’t required by law to be VAT registered
- you haven’t registered for VAT voluntarily
|the value of the taxable supplies you make is over a specified threshold||you must register for VAT|
|you’re an NETP (see section 9), and you make any taxable supplies in the UK||you must register for VAT|
|you’re registered for VAT||you must account for VAT on all the taxable supplies you make (apart from the zero-rated ones) from the date that you’re first registered|
In most cases, a ‘supply’ is the sale of goods or services, including sale by barter. It can also include ‘deemed supplies’. Deemed supplies include:
- some services you receive from overseas (see VAT Notice 741: place of supply of services-before 1 January 2010, section 16) - although you receive the supply, you’re deemed also to have made it
- where you use your own labour to construct a building for your own business use, you are, in certain circumstances, deemed to have supplied the value of the labour (see VAT Notice 708: buildings and construction, section 25)
- receipt of specified goods and services which are subject to the domestic reverse charge (see VAT Notice 735: VAT domestic reverse charge on specified goods and services)
Contact the VAT Helpline for further advice if you think this applies to you.
2.4 Zero-rated supplies
Zero-rated supplies are taxable supplies on which the current VAT rate is 0%.
- most food (but not meals in restaurants or cafes, or hot takeaway food and drink)
- young children’s clothing and shoes
- exported goods (for further information, see VAT Notice 703: export of goods from the UK)
- most prescriptions dispensed to a patient by a registered pharmacist
- most public transport services
This isn’t a full list. If you aren’t sure whether the supplies you make are zero-rated, please call the VAT Helpline.
If all or most of your supplies are zero-rated, you may not need to be registered for VAT. This is called exemption from registration (see paragraph 3.11).
2.5 Reduced-rate supplies
Reduced-rate supplies are taxable supplies on which the current VAT rate is 5%.
- supplies of domestic fuel or power
- installation of energy-saving materials
- grant-funded installation of heating equipment or security goods or connection of a gas supply
- women’s sanitary products
- children’s car seats
- residential conversions
- residential renovations and alterations
This isn’t a full list. If you aren’t sure whether the supplies you make are reduced-rated, please call the VAT Helpline.
2.6 Exempt supplies
Exempt supplies are business supplies which don’t meet the definition of taxable supplies. In other words, they’re business supplies on which VAT isn’t charged.
- certain selling, leasing and letting of land and buildings (but not lettings of garages, parking spaces or hotel and holiday accommodation) - see VAT Notice 742: land and property
- betting, gambling and lotteries (but not takings from fruit machines)
- providing credit
- certain education and training
- fund raising events by charities
- subscriptions to certain membership organisations
- the services of doctors and dentists
- certain services from undertakers
This isn’t a full list. If you aren’t sure whether the supplies you make are exempt from VAT, please call the VAT Helpline.
- you’re registered for VAT
- some of the supplies you make are exempt
you may not be able to get back all the VAT you have been charged on things you bought for your business. VAT Notice 706: partial exemption tells you more about this.
If all your supplies are exempt, you won’t be able to register for VAT.
2.7 Specified supplies
Specified supplies are supplies which would be exempt from VAT if you made them in the UK.
|you supply finance, insurance services, or investment gold to customers in countries outside the EU||you’re making specified supplies|
|you make supplies of insurance or finance services (including intermediary services) which are directly linked to the export of goods outside the EU||you’re making specified supplies regardless of where the person who receives the supply is established|
|you make specified supplies||you may register for VAT on a voluntary basis - registering for VAT will allow you to claim back any VAT you’ve paid in respect of the supplies|
|you’re making this type of supply and think you might be able to register||you should phone the VAT Helpline for further information|
2.8 Opting to tax land and buildings
You can voluntarily opt to tax certain supplies of land and buildings which would otherwise be exempt from VAT. You can find out more about this, and how to do it, in VAT Notice 742A: opting to tax land and buildings. Opting to tax means that you will charge VAT on the supplies you make.
If you opt to tax, you must include the value of the supplies of the land and buildings covered by the option in your taxable turnover when you’re deciding whether you’re liable to be registered. See paragraph 3.4, or if you wish to register on a voluntary basis, see paragraph 3.9).
If you’re applying to register for VAT online, tell HMRC that your business is involved with land or property. You’ll then be guided to download and complete the forms you’ll need for an option to tax.
If you’re applying to register for VAT using a paper form VAT1: application for registration, you’ll need to enclose written notification that you’re opting to tax.
2.9 If you only supply goods or services abroad
If you’ve got a business establishment in the UK (including a branch or agency) or you usually live in the UK and you only make supplies to customers outside the UK, but those supplies would be taxable if you made them in the UK, you can register for VAT on a voluntary basis. This is as long as you receive taxable supplies from UK VAT registered businesses, or import goods into the UK and you’d be entitled to claim back the VAT on those supplies.
If you think you might be able to register, please phone the VAT Helpline for more advice.
2.10 Taking over a business
If you take over a VAT registered business, or part of a VAT registered business, from somebody else as a going concern, you may be liable to be registered (see paragraph 3.8).
If you’re liable to be registered
- your registration date will be the date you take over the business
- you may be able to transfer the previous VAT registration number to yourself
Section 4 tells you how to register for VAT in these circumstances.
Even if the previous owner wasn’t registered for VAT, you should still check to see whether you need to register. Section 3 will help you to work that out.
2.11 You’ve been registered for VAT before
When you apply to register for VAT, tell HMRC if you are currently involved, or have been involved in the last 2 years, in any other VAT registration.
- ask for a payment in advance
- a guarantee as security
if we think we’ll have problems collecting money from you. The information you give us when you apply to register will help us decide whether we need to do this.
The Tax deposits and bonds guidance explains when we might require security.
2.12 You live or work abroad
If you live in this country but carry out part of your business abroad, or you’ve got a place of business in this country but you live abroad, you may still have to register.
You’ve got a business establishment in the UK so you’d be liable to register subject to the normal rules.
3. Working out whether you need to register
3.1 When you have to register for VAT
You have to register for VAT when the total value of your:
- taxable supplies (see paragraph 2.3)
- distance sales (see section 6)
- relevant acquisitions (see section 7)
goes over the current registration thresholds.
You have to register for VAT if you make distance sales of excise goods, or relevant supplies in the UK of any value (see section 8). There is no registration threshold for these supplies.
If you’re a non-established taxable person (NETP), the registration threshold for taxable supplies doesn’t apply to you, so you’ll have to register for VAT if you make taxable supplies of any value in the UK. See paragraph 9.3 for more information.
- required to be registered
under any of the above categories, you’re a taxable person.
As a taxable person, from the date that you’re required to be registered, you must account for VAT on all of your:
- taxable supplies
- distance sales
- relevant supplies in the UK
3.2 Registration thresholds
The Supplement to this notice has details of past and current registration thresholds.
3.3 When you have to register for VAT - how to work it out
If you make taxable supplies in the UK (see paragraph 2.3), you’re liable to register if:
- at the end of any month, the value of your taxable supplies in the previous 12 months or less is over the registration threshold
- at any time, you expect the value of your taxable supplies in the next 30 day period alone, to go over the registration threshold
For help with working out the value of your taxable supplies, see paragraph 3.4.
If you make distance sales into the UK (see section 6), you’re liable to register if, at any time during the calendar year from 1 January, your total goes over the distance sales threshold. If you make distance sales in the UK of excise goods, such as tobacco or alcohol, you must register for VAT whatever their value (see paragraph 6.6).
If you make acquisitions in the UK, you’re liable to register if one of the following applies:
- at the end of any month, the total value of your relevant acquisitions from all other EU states in the year, or part year, from 1 January has gone over the registration threshold
- it’s reasonable to assume that the value of the relevant acquisitions you’ll make in the next 30 days alone will be over the registration threshold
For help with working out the value of your relevant acquisitions, see VAT Notice 725: the single market.
You’re liable to register if you make any relevant supplies in the UK, or at any time, you’ve got reasonable grounds to believe you’ll make relevant supplies within the next 30 days.
3.4 Working out the value of your taxable supplies
If you’re making taxable supplies (see paragraph 2.3) you need to know what your taxable turnover is so that you can work out if and when you need to register for VAT.
Your taxable turnover is the total value of all the taxable supplies (including the zero-rated ones) which you make in the UK or Isle of Man. You don’t need to include the:
- value of any capital assets (such as buildings, equipment or vehicles) which you’ve sold
- value of any exempt supplies you’ve made (see paragraph 2.6)
However, if you’ve sold land or buildings which are subject to an option to tax, and the sale wasn’t zero-rated, you must include that sale in your taxable turnover.
There are special rules for working out your taxable turnover if you’re a tour operator and you make taxable supplies which:
- are normally used by travellers, for example, hotel and holiday accommodation or passenger transport
- you buy in and re-supply to travellers without charging them
VAT Notice 709/5: tour operators margin scheme explains the rules and tells you how to account for VAT on these supplies if you become registered.
3.5 Working out the value of your distance sales
When you’re working out the total value of your distance sales, you can exclude any:
- new means of transport you’ve bought
- goods which you’ve installed or assembled at your customers’ premises
See VAT Notice 725: the single market for details of how to account for VAT on these supplies.
3.6 Types of registration
You can register as a:
- sole proprietor
- corporate body
- club or association
Two or more corporate bodies may apply to register as a single taxable person (VAT group) if they can meet certain conditions.
A corporate body can apply to register each division separately if it:
- is organised in divisions
- carries on its business in divisions
- can meet certain conditions
You can find out more about these types of registration in VAT Notice 700/2: group and divisional registration.
3.7 You’ve gone over the registration threshold temporarily
You may not have to register if, at the end of any month:
- your taxable supplies went over the registration threshold in the last 12 months
- you can show HMRC that your taxable supplies won’t go over the deregistration threshold in the next 12 months
This is called exception from registration.
You’ve still got to tell HMRC’s VAT Registration Service that you’ve reached the threshold within 30 days of the end of that month, but you won’t have to fill in any forms if we allow you exception from registration.
If we have allowed you exception from registration, this doesn’t mean you’ll never have to register. Keep on checking the value of your taxable supplies every month to see whether you’ve gone over the threshold again. Don’t leave out any supplies just because we’ve allowed you exception from registration since you made them. If you do become liable to register again, you can apply for exception again if you can show us that you meet the criteria.
If we’re not satisfied that you meet the criteria for exception from registration, we’ll register you for VAT from the day you were liable to be registered (see paragraph 3.3), and you’ll need to account for VAT from that date. So it’s in your own interests to send us your application, with a full explanation, as early as possible.
3.8 Taking over a business as a going concern
If you take over a business, or part of one, from someone who was, or should have been, registered for VAT, there are some checks you need to do.
Work out the value of the taxable supplies the business made in the 12 months before it was transferred to you.
Add that figure to the value of any taxable supplies you made in the 12 months before the transfer.
|the total comes to more than the registration threshold in force on the day of transfer||you’ll have to register for VAT from that date, unless you qualify for exception from registration (see paragraph 3.7) or exemption from registration (see paragraph 3.11)|
|the total is below the registration threshold||you won’t be required to register at that time. Carry on including the supplies the business made before you took over in your month-end calculations. Register as normal if, at the end of any month, the total supplies for the last 12 months is over the registration threshold.|
The person who sells the business to you is responsible for keeping the business records from before the date of the sale. But they should give you all the information you need to meet your VAT obligations.
Where the VAT registration number is transferred along with the business, you’re responsible for keeping all the business records.
|the seller asks permission from HMRC to keep the records||you’ll need to get the information you need to meet your VAT obligations from them|
|you can’t get the information you need from the seller||you can ask us to disclose the information we hold - we’ll tell the seller that you’ve asked us to disclose the information|
If you want to use the previous owner’s VAT number, you and the seller must both tell us separately. You can do this through our online services, or by sending us a completed form VAT68: request for transfer of a registration number.
If the business you’re buying included land or property under an option to tax, the option won’t transfer to you automatically. If you want to continue to charge VAT, you’ll need to make your own option to tax.
3.9 Registering for VAT voluntarily
If you aren’t liable to be registered because the value of your:
- taxable supplies
- distance sales
is below the thresholds, you can apply for voluntary registration.
You can also apply to register before you start to make taxable supplies, distance sales or acquisitions.
You may only register if you’re in business. HMRC defines business as a continuing activity carried on with the intention of making supplies for a consideration. Non-business activities can include those carried on as a hobby, or supplies made in a purely private capacity (for example, the sale of personal belongings). The terms business and non-business are explained in greater detail in VAT Notice 700: the VAT guide.
In some cases, we may ask you to show us that you plan to make taxable supplies.
You can apply for voluntary registration to be backdated by up to 4 years from the current date.
Think carefully about whether registering will really benefit you.
If we agree to register you from an earlier date, you can recover VAT other people charged you in respect of your taxable supplies from that date.
- must also account for VAT on all the reduced-rate and standard-rate taxable supplies, distance sales and acquisitions you made from that date
- can’t normally change the date later
If you apply to register for VAT, you should follow the instructions in paragraph 4.1.
3.10 Registering for VAT voluntarily if you make relevant acquisitions
You may apply for voluntary registration if you can show HMRC that you’re making, or intend to make, relevant acquisitions, even if the value of those relevant acquisitions is below the threshold.
Paragraph 3.9 gives more information about voluntarily registering for VAT.
Paragraph 7.4 gives more information about registering before you start to make relevant acquisitions.
3.11 When you might be exempt from registration
|all or most of your taxable supplies, or relevant acquisitions, are zero-rated (see paragraph 2.4)||you may not need to be registered for VAT - this is called exemption from registration|
|you want to apply for exemption from registration||you can use HMRC’s online tax registration service, or write to the VAT Registration Service in Wolverhampton - the address details are shown in section 17|
|you want to apply for exemption from registration but VAT is due on some of your supplies||you must be able to show us that, if you were registered, your input tax would normally be more than your output tax. Input tax is the VAT you pay on the goods and services you purchase for use in the course of your business. Output tax is the VAT you account for on your taxable supplies.|
|you make relevant supplies of assets which are zero-rated (see section 8)||you should send us a completed form VAT1C: registration notification and enclose a letter confirming your request and explaining why your supplies are zero-rated|
|we allow you exemption from registration||you won’t be able to reclaim the input tax you pay when you buy goods or services for your business. You must tell us at any time if your circumstances, including the nature of the supplies you make, change. This is because you may no longer be entitled to exemption.|
|we don’t accept your application for exemption from registration||we’ll register you for VAT from the day you were liable to be registered (see paragraph 3.3) and you’ll need to account for VAT from that date. It’s sensible to apply for exemption as early as possible so that we can reach a decision in good time.|
3.12 If you need to register for the VAT Mini One Stop Shop (VAT MOSS)
If you make cross-border supplies of digital services, you will need to register for VAT MOSS. You have to be registered for VAT before you can register for Union VAT MOSS.
When you apply to register for VAT, you will be asked to search for a business activity. Enter ‘Digital Services’ and select ‘Supplies of Digital Services (below UK VAT threshold) under VAT MOSS arrangements’.
If your turnover is below the UK VAT registration threshold, and you’re only registering for UK VAT so that you can use the VAT MOSS scheme, you will only need to submit nil VAT returns.
4. How and when to apply to register for VAT
4.1 How to apply to register for VAT
If you’re applying for registration because either your taxable supplies have exceeded the threshold, or you’re an NETP making supplies in the UK, you can use HMRC’s online application service.
You can ask an agent to do this for you. As the person registering, you’ll still be responsible for the accuracy of the application. The service and full terms and conditions of its use can be found on GOV.UK.
If your business is a partnership, the online service will ask you for more information.
If you’re taking over a business and you want to keep its existing VAT registration number, you and the previous owner can both notify us separately through the online service.
You will need to complete a paper copy of the appropriate form if you’re applying for registration because your turnover has exceeded the registration threshold for:
- distance sales (form VAT1A: application for registration - distance selling)
- relevant acquisitions (form VAT1B: application for registration - acquisitions)
- relevant supplies (form VAT1C: registration notification)
Or if you don’t want to use the online registration service.
You may also need to complete form:
- VAT2: partnership details if your business is a partnership
- VAT68: request for transfer of a registration number if you’re taking over a business and you want to keep the previous owner’s VAT registration number
- VAT1TR: appointment of tax representative if you’re appointing a tax representative
You can see examples of all the forms in section 16.
4.2 When to apply to register for VAT
|Where you’re liable to register because||you must tell HMRC|
|at the end of any month the value of your taxable supplies in the last 12 months or less has exceeded the threshold, or the value of your relevant acquisitions has exceeded the threshold||within 30 days from the end of the month that this occurred|
|you expect your taxable supplies or relevant acquisitions in the next 30-day period alone to exceed the threshold||within 30 days of the date that expectation arose|
|the value of your distance sales has exceeded the threshold||within 30 days of the date this happened|
|you make relevant supplies||within 30 days of making the supply|
|you’ve reason to believe that you’ll make a relevant supply in the next 30 days||before the end of this 30-day period|
|you’re taking over a business as a going concern||within 30 days of the business being transferred|
4.3 Your registration date
|Registration type||If you||your registration date will be|
|Taxable supplies||have already gone over the registration threshold (see paragraph 3.2)||the first day of the second month after your taxable supplies went over the registration threshold|
|Taxable supplies||expect to go over the registration threshold within the next 30 day period alone||the date you first expected your taxable supplies to go over the registration threshold|
|Distance sales||need to register because the value of your distance sales in the year or part year from 1 January went over the distance sales threshold||the date that your sales exceeded the threshold|
|Relevant acquisitions||need to register because the total value of your relevant acquisitions from all other EU States in the year or part year from 1 January went over the registration threshold||the first day of the second month after this happened|
|Relevant acquisitions||think that the value of the relevant acquisitions you will make in the next 30-day period alone will be over the registration threshold||the date you first expected this would happen|
|Relevant supplies||make a relevant supply||the date of your first supply|
|Relevant supplies||expect to make a relevant supply within the next 30 days||the date you first expected to make relevant supplies. If you’ve made a relevant supply and there were no reasonable grounds for believing that you would do so, then we will register you from the date you made your first relevant supply.|
If you must register for taxable supplies and relevant acquisitions, your registration date will be the earlier of the 2 dates.
4.4 Working out when to apply to register for VAT - examples
(a) If you make taxable supplies
|If||you must complete your online application, or fill in and send us a paper VAT1, by||and your registration date will be|
|your taxable supplies in the previous 12 months went over the registration threshold on 31 August||30 September||1 October|
|you expect your taxable supplies will go over the registration threshold in the next 30 days alone on 20 January||18 February||20 January|
(b) If you make distance sales
|If||you must fill in and send us a form VAT1A by||and your registration date will be|
|the date your distance sales went over the registration threshold was 15 June||15 July||15 June|
(c) If you make relevant acquisitions
|If||you must fill in and send us a form VAT1B by||and your registration date will be|
|the date your relevant acquisitions went over the registration threshold was 31 May||30 June||1 July|
|the date you expect your relevant acquisitions will be over the acquisition threshold in the following 30 days alone is 20 January||18 February||20 January|
(d) If you make relevant supplies
|If||you must fill in and send us a form VAT1C by||and your registration date will be|
|your first relevant supply was made on 22 April||21 May||22 April|
|on 22 April you expect you will make your first relevant supply in the next 30 days||21 May||22 April|
4.5 Your VAT registration number - when to expect it
When HMRC gets your application, we need to check all the details before we can send you your VAT registration number.
If you’ve used the online application system, we’ll send you an online message within 3 working days which will either:
- tell you what your VAT registration number is
- let you know there’s going to be a delay because we need more information from you
If you’ve sent your application on a paper form, we aim to send a certificate which shows your full registration details within 15 working days of receiving the form. Please don’t contact us before then or you might delay us processing your application.
The application may take longer to process if we need more information from you.
If you haven’t heard from us after 15 working days, please contact our VAT Registration Service to make sure that they have received your application.
4.6 If you don’t tell HMRC at the right time
Regardless of when you let HMRC know, we’ll register you from the date you were liable to be registered.
You’ll also have to account for VAT from that date even if you didn’t charge it to your customers. You may be able to offset this against any input tax on costs you’ve incurred and for which you hold VAT invoices, subject to the normal rules (see paragraph 5.2).
If you don’t register at the right time, you might get a financial penalty. Section 15 gives more information.
5. Accounting for VAT
5.1 Keeping records and charging VAT - when to start
You must start keeping records and accounting for VAT from the date you become liable to register.
You may wish to increase your prices to include VAT. Don’t show VAT as a separate item on any invoices you issue until you’ve received your registration number. You can explain to your VAT registered customers that you’ll be sending them VAT invoices later. Once you’ve got your registration number, you should send them the necessary invoices showing VAT within 30 days.
If you’ve asked for voluntary registration, you should start keeping records and accounting for VAT from the date you’re registered. This will normally be the registration date you asked for.
Once you’re registered, you must account for VAT on all the:
- taxable supplies (apart from the zero-rated ones)
- distance sales
- relevant supplies
you make in the UK, regardless of whether those values are above the individual registration thresholds.
For example, let’s say you had to register for VAT because your distance sales went over the threshold. Now that you’re registered, you’ve got to account for VAT on your taxable supplies and acquisitions as well.
Remember, you’ll have to account for VAT from your registration date. Submit your application as early as you can so that HMRC can let you have your registration number in good time.
5.2 VAT you paid before you registered
Subject to certain conditions, you can claim back any VAT you’re charged on goods or services which you use to set up your business. Normally, this will include:
- VAT on goods supplied to you for use in your business up to 4 years before your registration date and which you haven’t used up or sold
- VAT on services supplied to you not more than 6 months before your registration date
We may allow you to backdate your registration voluntarily by up to 4 years when you apply to register. You should think carefully about whether this would be a good idea for you because, once we agree a registration date with you, we won’t normally allow you to change that date.
You should include your claim for this VAT on your first VAT return. VAT Notice 700: the VAT guide tells you how to do this.
5.3 The records you need to keep
You need to keep records of all your business sales and purchases. You should also keep a note of all the VAT you’ve charged and paid for each VAT return period. This is called a VAT account.
If you’re already in business, you’ll probably find that your normal business records already provide most of this information.
There is more information about what you need to do in VAT Notice 700/21: keeping VAT records.
5.4 Schemes which might help you to account for VAT
HMRC offers a number of schemes which are designed to make accounting for VAT easier for you.
If you sell direct to the public you might be able to account for VAT using a retail scheme - for more information about these schemes, including the special records you need to keep, see VAT Notice 727: retail schemes.
The Cash Accounting Scheme allows eligible businesses to account for VAT on the basis of payments received and made - for more information about this scheme, see VAT Notice 731: cash accounting.
The Annual Accounting Scheme allows eligible businesses to complete a single annual VAT return - for more information about this scheme, see VAT Notice 732: annual accounting.
The Flat Rate Scheme offers eligible, small businesses an alternative to the normal basis of accounting for VAT. If you use the scheme, you won’t have to record VAT in your accounts against every purchase and sale. Instead, you can work out the net amount of VAT you need to pay HMRC as a percentage of your total turnover. For more information about the scheme, see VAT Notice 733: Flat Rate Scheme for small businesses.
5.5 The VAT Return
This is the document you use to tell HMRC how much VAT you:
- owe on your sales
- are claiming back on your purchases
You’ll also need to tell us the value of the goods and services you bought and sold during the period of the return. When you submit your VAT Return, you should pay any tax you owe. If we owe you tax, your VAT Return will be your claim for repayment.
You’ll normally have to submit a VAT Return every 3 months. We call the period covered by this return your tax period.
To find out more, see VAT Notice 700/12: how to fill in and submit your VAT Return.
5.6 Monthly VAT returns
Once you’re registered for VAT, if you expect your input tax will be more than your output tax, you can ask HMRC to issue your VAT returns on a monthly basis.
In certain circumstances, we may require you to submit your VAT returns once a month.
5.7 Outputs and inputs
These are the sales and purchases you make for your business.
Your sales are your outputs and the VAT you charge on them is your output tax.
If your customers are registered for VAT, your outputs are their inputs and your output tax is their input tax.
In the same way, the VAT which other businesses charge you is your input tax.
You take your total input tax figure away from your total output tax figure and pay the balance to HMRC. If your input tax is greater than your output tax, you claim the difference back from HMRC.
5.8 Tax periods which match your financial year
HMRC can normally arrange this. Ask us when you register.
6. Distance selling
6.1 Distance selling - definition
Distance selling is when a taxable person in one EU member state supplies and delivers goods to a customer in another EU member state and the customer isn’t registered for VAT or liable to be registered for VAT.
We call these customers ‘non-taxable persons’. They include private individuals as well as:
- public bodies
- businesses which aren’t registered for VAT because their turnover is below the registration threshold, or their activities are entirely exempt from VAT
The most common example of distance sales is mail order sales.
If you make distance sales in the UK of goods which are subject to Excise Duty, there are special rules. See paragraph 6.6 for more information.
6.2 How distance selling works
|you’re registered for VAT in one EU member state (for example, France) and you make supplies to customers in the UK||you should account for the VAT on those supplies in France until the value of your distance sales to the UK goes over the UK’s distance selling threshold|
|the value of your distance sales to the UK goes over the distance selling threshold||you must register for VAT in the UK and account for the VAT on the distance sales you make to the UK through your UK VAT Return. This is because, once you’ve exceeded the threshold, your distance sales are treated as being supplied in the UK.|
6.3 After you register in the UK
Once you’re registered for VAT in the UK, you have to follow all the usual rules which apply to UK VAT registered businesses.
You have to:
- keep a record of all the distance sales you make to the UK
- issue VAT invoices to all your customers, including those who are private individuals
For more information about VAT invoices, see VAT Notice 700: the VAT guide.
You also have to account for VAT on all of your:
- taxable supplies
- relevant supplies
in the UK, whether or not the values of those types of supply are over the relevant registration thresholds.
6.4 If you’re already registered for VAT in the UK
|you’re already registered for VAT in the UK because the value of your taxable supplies or relevant acquisitions is over the relevant threshold or because you’ve registered voluntarily||you must account for VAT on your distance sales in the UK even if their value hasn’t exceeded the threshold (see paragraph 3.1)|
6.5 If you make distance sales to more than one member state
Once the value of your sales to any member state goes over that state’s distance-selling threshold, you will have to register in that state separately.
If you’re making sales to more than one member state, you should keep separate records of the value of your sales to each state. This will help you to register in each state at the right time.
You’re responsible for making sure you account for VAT to the correct tax authority. You can find a list of addresses for tax offices in other member states in VAT Notice 725: the single market.
6.6 If you make distance sales of excise goods
|sell excise goods, such as tobacco and alcohol, to customers in the UK from another EU member state||you must register and account for the duty and VAT due in the UK. There is no registration threshold for these sales. You always have to account for excise duty and VAT on these goods in the UK.|
6.7 If you want to make the UK your place of supply
You can choose to make the UK the place of supply for your distance sales if they’re below the UK threshold.
If you want to do this, you will have to register for VAT in the UK. You will have to:
- use form VAT1A: application for registration - distance selling to tell HMRC you want to register in the UK at least 30 days before you make your first supply
- register for VAT in the UK from the date of the first supply after you opted to account for the VAT in the UK
- account for VAT in the UK on all distance sales you make in the UK
- comply with all the usual UK VAT rules - see VAT Notice 700: the VAT guide
- normally remain registered in the UK for at least 2 years
6.8 Registering in the UK before you start making distance sales
You can apply to register for VAT in the UK before you start to make any distance sales in the UK.
If you want to do this, you’ll need to:
- satisfy HMRC that, from a certain date, you’ve a real intention to make distance sales to the UK and account for VAT in the UK
- fill in a form VAT1A: application for registration - distance selling and send it to us
- enclose written evidence showing you’ve made firm arrangements to start making distance sales
- tell HMRC the date you wish to be registered from and the date you expect to make your first distance sale
If we’re not satisfied that you intend to make distance sales in the UK, we may refuse your application.
7. Relevant acquisitions
7.1 Relevant acquisitions - definition
|you’re an organisation or business and you don’t make, or intend to make, any taxable supplies in the UK||any goods you buy from a VAT registered supplier in another EU member state to bring to the UK are relevant acquisitions. These arrangements don’t apply to purchase of services or to private individuals acting in a purely personal capacity.|
This will normally only apply to organisations located in the UK which either:
- use the relevant acquisitions in the UK to make only non-business supplies
- make wholly exempt supplies
If you register for VAT because of your relevant acquisitions, you won’t usually be able to claim any VAT back on your purchases. This is because you’re not making any taxable supplies.
7.2 When you must register and account for VAT
When the total value of your relevant acquisitions is over the registration threshold, you have to register and account for VAT in the UK. Section 3 tells you about the threshold and how to work out if you need to register.
When you make a relevant acquisition, VAT becomes due from you when you acquire the goods. You should account for it on your VAT return. For more information, please see VAT Notice 725: the single market.
If you aren’t registered for VAT in the UK, you’ll be charged VAT in the EU member state where you buy the goods.
7.3 Registering for VAT if you’re below the threshold
HMRC will allow you to register if you are below the threshold, but you should remember that it’s unlikely that you’ll be able to claim any VAT back on your purchases. Once registered, you’ll have to comply with the normal UK VAT registration requirements. You must normally remain registered for 2 clear calendar years after your registration date.
7.4 Registering for VAT before starting to make relevant acquisitions
If you want to do this, you’ll need to:
- satisfy HMRC that, from a certain date, you’ll be making relevant acquisitions
- fill in a form VAT1B: application for registration - acquisitions and send it to us
- enclose written evidence showing you’ve made firm arrangements to start acquiring goods from other EU member states
- tell us the date you wish to be registered from and the date you expect to make your first relevant acquisition
7.5 When registration for relevant acquisitions isn’t required
You won’t need to register because of your relevant acquisitions if you:
- are already registered for VAT
- have already applied to register for VAT
- are a private individual buying goods from other EU countries for your own use and not for use in a business of any kind - in these circumstances, you will be charged VAT on the goods in the country you buy them from
8. Relevant supplies of assets
8.1 Relevant supplies - definition
A relevant supply is a taxable supply of goods which are assets of a business where the person making the supply, or a predecessor (see paragraph 8.2) has received or claimed, or is intending to claim a repayment of VAT under the Eighth or Thirteenth Directive refund arrangements. See VAT Notice 725: the single market.
A relevant supply includes the supply of an asset which incorporates parts on which such a repayment has been, or will be, claimed.
An asset includes a capital asset.
8.2 Predecessor - definition
A predecessor is someone who:
- claimed the repayment of VAT
- transferred the assets under the provisions which allow VAT relief on the transfer of a business or part of a business, see VAT Notice 700/9: transfer of a business as a going concern
Where there has been more than one transfer, the predecessor may be a person several transfers back. The liability of the assets to be a relevant supply doesn’t change.
8.3 When you have to register
You have to register if you make, or intend to make, a relevant supply in the next 30 days.
There is no registration threshold for relevant supplies.
Unregistered persons who are established in the UK and who make relevant supplies may be liable to register. They’ll normally only be affected where a predecessor of theirs made a claim under the Eighth or Thirteenth Directive refund arrangements. They may be entitled to claim exemption from registration. See paragraph 3.11.
If you’re already registered for VAT, you won’t be affected unless you’re considering deregistering.
9. NETPs - basic information
9.1 NETP - definition
A non-established taxable person (NETP) is any person who isn’t normally resident in the UK, doesn’t have a UK establishment and, in the case of a company, isn’t incorporated in the UK.
9.2 UK establishment: definition
A UK establishment exists if either:
the place where essential management decisions are made and the business’s central administration is carried out is in the UK
the business has a permanent physical presence with the human and technical resources to make or receive taxable supplies in the UK
We would normally consider a company which is incorporated in the UK to have an establishment in the UK as long as it’s able to receive business supplies at its registered office.
9.3 When an NETP must register for VAT in the UK
If you make any taxable supplies (see paragraph 2.3) in the UK, you must register for VAT in the UK, and account for UK VAT to HMRC.
9.4 If you have an establishment in the UK
If you have a UK establishment, you aren’t an NETP. You’ll be registered at the address of your principal UK place of business. Your VAT records and accounts should be kept at this address and should be available for HMRC to inspect.
You should ensure that someone responsible for your VAT affairs can be available at the address. If that person is an employee, you should give them written authority to act on your behalf. A suggested form of words for this authority is at paragraph 11.7.
A separate authority won’t be required:
- if the person has been notified to the Registrar of Companies under the Companies Act 1985, Part XXIII as a UK resident authorised to accept service of process on behalf of the company
- for a partnership, where the person concerned is a partner and is resident in the UK
10. NETPs - voluntary registration
10.1 When an NETP can register voluntarily
You may be entitled to register in the UK voluntarily and claim back any VAT you’ve been charged in the UK if you intend to make taxable supplies in the UK more than 30 days in the future. Section 4 explains how to register.
11. NETPs - tax representatives and agents
11.1 Tax representatives - appointment and role
If you’re an NETP, you may appoint a tax representative.
A tax representative:
- must keep your VAT records and accounts and account for UK VAT on your behalf
- is jointly and severally liable for any VAT debts you incur
You may only appoint one person at a time to act on your behalf, although a tax representative may act for more than one principal at any time.
For each principal a tax representative represents, they must:
- keep separate VAT accounts
- make separate VAT returns
11.2 Tax representatives - what you must do if you appoint one
When you register for VAT online, you will be asked for information about your tax representative. You’ll need to give your representative enough information to allow them to:
- keep a VAT account
- make returns
- pay VAT
on your behalf.
11.3 When HMRC can make you appoint a tax representative
HMRC can direct some NETPs to appoint a tax representative who:
- must be based in the UK
- must be fit and proper (see paragraph 11.4)
We can’t direct NETPs who are established in other EU member States, or who are based in countries where certain mutual assistance arrangements exist.
11.4 What makes a tax representative fit and proper
A tax representative must meet or exceed a particular level of suitability, compliance and integrity in how they conduct, or appear likely to conduct, their tax affairs with HMRC.
In determining whether a particular individual is a fit and proper person to act as a VAT representative for an NETP, we will use the following criteria. A person may not be accepted if they:
- have been disqualified as a Director under Company Law
- are or have been involved in crime and or have relevant criminal convictions
- have had previous requests for a similar role in VAT or any other tax or duty regime revoked or refused
- have personally received penalties for deliberate wrongdoing
- have any connection with the business they wish to represent, or with key persons involved in that business, or with any non-compliant or fraudulent businesses
Where we become aware of information that suggests a person may not be a fit and proper person, we may refuse to register them as a tax representative.
11.5 What if the tax representative I have appointed is not fit and proper
Where HMRC has reason to believe that a tax representative may not be fit and proper, we may cancel their registration as a tax representative.
If we have directed you to appoint a tax representative (see paragraph 11.3), you’ll need to appoint a new representative who is fit and proper.
11.6 When you can appoint an agent instead of a tax representative
As long as HMRC has not directed you to appoint a tax representative, you can appoint an agent to deal with your UK VAT affairs. Any arrangement you make will be subject to whatever contractual agreement you and your agent decide. We can’t hold your agent responsible for any of your VAT debts. We reserve the right not to deal with any particular agent you may choose to appoint. In some circumstances, if we think it’s necessary, we may still insist that you appoint a tax representative.
As with the appointment of tax representatives:
- you may only appoint one person at a time to act as your agent (although an agent may act for more than one principal)
- you must still fill in the appropriate form to apply for registration (see paragraph 4.1)
- we’ll need your authority before we can deal with your agent - in the case of agents, the authority should be in a letter. We’ve suggested a form of words at paragraph 11.7
- you’ll need to give your agent enough information to allow them to keep your VAT account, make your returns and pay VAT on your behalf
11.7 Letter to authorise an agent or employee to act in VAT matters - suggested wording
(Insert principal’s name) of (insert principal’s address) hereby appoints (insert name of UK agent or employee) of (insert address of UK agent or employee) to act as agent for the purpose of dealing with all their legal obligations in respect of VAT.
This letter authorises the above-named agent to submit VAT returns and any other document needed for the purpose of enabling the agent or employee to comply with the VAT obligations of the principal.
Signed (insert principal’s signature)
Date (insert date)
11.8 If you don’t want to appoint a tax representative or an agent
If you don’t want to appoint a tax representative or agent, and HMRC hasn’t directed you to appoint a tax representative, you must meet all your obligations under UK VAT law yourself. This includes:
- registering for VAT at the correct time
- keeping a record of everything you buy and sell in relation to your business in the UK
- keeping the records needed to complete your VAT Return
- producing records and accounts to HMRC for inspection
- keeping a note of all the VAT you’ve paid and charged for each period covered by your VAT Return
- paying the right amount of tax on time
There is more information about keeping records and accounts in VAT Notice 700/21: keeping VAT records.
12. NETPs - complying with your VAT obligations
12.1 If you don’t register for VAT at the right time
If you don’t register for VAT in the UK when you’re required to, HMRC may register you without your agreement.
We may also charge you a penalty if you fail to tell HMRC at the correct time that you should’ve registered for VAT. You can find more information about registration and the relevant time limits in section 4 and section 5.
The amount of the penalty is a percentage of the net VAT due, from the date when you should’ve registered to the date when we either:
- received your application
- became fully aware of your need to be registered
The percentage varies according to how late you were in registering.
|If you registered||Then the penalty rate will be|
|less than 9 months late||5%|
|9 to 18 months late||10%|
|more than 18 months late||15%|
There is a minimum penalty of £50.
See VAT Notice 700/41: late registration penalty for further details.
12.2 If you don’t meet all of your UK VAT requirements
If your business doesn’t have a fixed establishment in the EU, and you don’t comply with your VAT obligations, HMRC may direct you to appoint a UK-established, fit and proper VAT representative (see paragraph 11.3), and/or require you to pay a financial security.
13. Overseas sellers
13.1 Overseas seller - definition
You’re an overseas seller if you both:
- sell goods stored in the UK to UK consumers through an online marketplace
- don’t have a business establishment in the UK
13.2 If you don’t meet all of your UK VAT requirements
HMRC will try to contact you, asking what action you intend to take, if you fail to:
- register for VAT in the UK
- supply accurate VAT Returns for sales in the UK
- pay the full liability arising from sales in the UK
This isn’t a full list.
If you continue to fail to meet your VAT requirements, we’ll contact the online marketplace(s) through which you’re trading. We’ll put the marketplace on notice that it may be held jointly and severally liable for VAT in respect of any sales you make through it from a specified date.
Once we’ve put the marketplace on notice, it will make whatever commercial decisions it considers necessary to protect itself from being pursued by us for your VAT debts. This may include withdrawing permission for you to sell through its website.
See VAT: overseas businesses using an online marketplace to sell goods in the UK for further information on online marketplaces where overseas sellers fail to pay their VAT.
14. After you register
14.1 Help and information for newly registered businesses
After you’re registered, HMRC will send you a letter which will explain how you can book a place on:
- a workshop to introduce you to VAT
- one of our Business Advice Open Days
These events are free and will help you understand how VAT works and how it is likely to affect your business. Further information is available from our VAT Helpline.
14.2 Visits by HMRC’s officers
From time to time, HMRC may need to inspect your VAT records. This is to make sure that you’ve accounted for the correct amount of tax at the right time. We’ll normally contact you before we visit to arrange a mutually convenient date and time. We occasionally make unannounced visits. If this happens, the attending officer will explain the reason for the visit.
The officer will:
- carry the visit out as quickly as possible with the minimum of inconvenience to your business
- try to deal with any queries you may wish to raise
If you’ve a business establishment in the UK, we’ll normally visit you there. You’ll need to make your books and trading records available at this address. If you’ve appointed a tax representative or agent, we’ll will normally visit them.
If you don’t have a UK business establishment, or haven’t appointed a tax representative or agent, you’ll need to make your books and trading records available at our Aberdeen VAT office if we ask for them. We’ll examine your records at this office and then return them to you.
You can find more about visits from our officers in VAT visits and inspections.
14.3 Change of registration details - what to do
Please let HMRC know about any changes which affect your VAT registration details. You can find out more about this in VAT Notice 700: the VAT guide.
You can use our online system to let HMRC know about changes to your:
- business name
- principal place of business
- bank details
- contact details
Or to request:
- a change of stagger
To let HMRC know about any other changes, you should write to our VAT Registration Service at Grimsby (see address at section 17). When you write, remember to:
- include your VAT registration number and address
- ensure that the registered person signs the letter (for example, if you’re a sole proprietor, you must sign to confirm the change in details)
This will help avoid any delay in recording the new information.
14.4 Change of legal entity - what to do
If you change the entity of your business, for example, from a sole proprietor to a partnership, you must either:
- apply for a new registration number
- ask to keep your existing number
Section 4 tells you how to let HMRC know that the new legal entity is liable to be registered.
15. Errors, late notification and fraud
15.1 If you get your registration date wrong
It’s important to get your registration date right.
If HMRC finds out that you should have been registered from an earlier date, you’ll have to pay VAT on the positive-rated taxable supplies you made from that date. We may also charge you a penalty.
15.2 If you tell HMRC late
Once you know you’re liable to register for VAT, it’s important to let HMRC know straightaway.
If you don’t let us know by the proper time, we may charge you a penalty which could be equal to the amount of VAT you should have paid us.
15.3 If you deliberately avoid registering for VAT
If you deliberately avoid registering for VAT, you may be liable to a penalty equal to the amount of VAT you should’ve paid. For serious offences, the matter will be investigated and HMRC may bring criminal proceedings against you.
16. Example forms
16.1 The following forms published under Regulation 5(1) of VAT Regulations 1995 are those which must be completed by businesses which are applying to register for VAT.
17. List of offices
If you aren’t using the online registration system, please send standard registration applications, and applications to register as a non-established taxable person, to:
HMRC VAT Registration Service
Please send applications to register a VAT group or to keep another business’s VAT number to:
HMRC VAT Registration Service
77 Victoria Street
18. Registration limits
19. Your rights and obligations
For an explanation of what you can expect from HMRC and what HMRC expects from you, read Your Charter.
20. Do you have any comments or suggestions?
If you’ve any comments or suggestions to make about this notice, please write to:
HM Revenue and Customs
Indirect Tax Process Team
This address isn’t for general enquiries.
For your general enquiries please phone our VAT Helpline.
21. Putting things right
If you’re unhappy with HMRC’s service, please contact the person or office you’ve been dealing with. They’ll try to put things right.
If you’re still unhappy, find out how to complain to HMRC.
22. How we use your information
Find out how HMRC uses the information we hold about you.