VAT in United Kingdom guide

United Kingdom VAT rates

In the United Kingdom, the term “taxable supplies” refers to supplies of goods and services that are liable to a rate of VAT, including zero rates.

In the United Kingdom, the following are the VAT rates:

• Standard rate: 20%
• Reduced rate: 5%
• Zero rate: (0%)

The standard rate of VAT applies to all supplies of goods or services unless a specific measure provides for the zero or reduced rate or an exemption.

UK VAT for digital service providers

In case of digital services, telecom services or broadcasting services supplied in a B2B context, the place of supply is the place where the recipient is established. No UK VAT should be charged, and reverse charge applies unless supplier and customer are established in United Kingdom. In case of digital services, telecom services or broadcasting services supplied in a B2C context we refer to the section on the Mini One-Stop Shop below for more information.

VAT is levied on most goods and services provided by registered businesses in the UK and some goods and services imported from outside the European Union. There are complex regulations for goods and services imported from within the EU. The default VAT rate is the standard rate, 20% since 4 January 2011 (more rates discussed in the below paragraph). There is also a certain UK VAT threshold company has to meet when VAT registration becomes mandatory.

In case of digital services, telecom services or broadcasting services supplied in a B2B context, the place of supply is the place where the recipient is established. No UK VAT should be charged, and reverse charge applies unless supplier and customer are established in United Kingdom. In case of digital services, telecom services or broadcasting services supplied in a B2C context we refer to the section on the Mini One-Stop Shop below for more information.

In case of digital services, telecom services or broadcasting services supplied in a B2B context, the place of supply is the place where the recipient is established. No UK VAT should be charged, and reverse charge applies unless supplier and customer are established in United Kingdom. In case of digital services, telecom services or broadcasting services supplied in a B2C context we refer to the section on the Mini One-Stop Shop below for more information.

UK VAT threshold

The VAT threshold in UK is based on VAT taxable turnover – the total value of everything what is sold or supplied that is not VAT exempt.

For the 2020/21 tax year, the UK VAT threshold is set at £85,000, but can change each year. It’s calculated on a rolling basis, so taxable turnover for a rolling 12 month period, not just in the current tax year, but also for last financial year or the calendar year must be taken into account.

UK VAT threshold table

VAT threshold UK for accounting scheme application:

VAT Registration in UK – United Kingdom

The obligation for VAT registration in UK might be triggered in different ways. Here is the the list of most common scenarios:

• Importing goods into UK from foreign countries;
• Buying and selling goods in UK (excluding domestic reverse charge);
• Selling the goods from UK to customers in other countries (B2B or B2C);
• Acquiring goods in UK from other foreign countries;
• Holdinging and storing inventory in UK for selling, distribution or consignment;
• E-commerce sales of goods to UK consumers;
• Organising events in UK where attendees or delegates are paying admission.

1StopVAT can provide VAT registration service in United Kingdom as well as other Global VAT/GST/Sales tax compliance services.

Late – registration penalties

A penalty is assessed for late VAT registration, therefore VAT threshold in UK should be examined constantly. This penalty is calculated as a percentage of the VAT due (output tax less input tax) for the “relevant period.” The “relevant period” begins on the date on which the business is required to be registered and ends on the date on which the UK VAT authorities became fully aware of this liability.