Registering for VAT

If the value of your taxable supplies is over a specified limit, you must register for VAT, unless your taxable supplies are wholly or mainly zero-rated in which case you may apply for exemption from registration. If you are registered for VAT, you must charge and account for VAT on all your taxable supplies from the date that you are first registered. You may apply for voluntary registration if the value of your taxable supplies is below the limits for compulsory registration.

You must notify HMRC within 30 days of your liability to be registered arising. You may be liable to a financial penalty if you fail to notify at the proper time.

Who has to be registered for VAT?

It is the person, not the business, who is registered for VAT and each registration covers all the business activities of the registered person. The person to be registered can be, for example, a sole proprietor; a partnership; a limited company; a club; an association; or a charity.

Types of VAT registrations

Supplies in the UK: You will have to register for VAT when you make supplies of goods or services in the UK over a specified limit to UK consumers (B2C) or to UK businesses (B2B).

Imports: You may also have to register for VAT when you import goods from outside the EU into the UK or into other member states of the EU.

Acquisitions: You may have to register for VAT when you acquire goods in the UK directly from another member state of the EU and the total value of these goods exceeds a certain limit. You must then register for VAT in the UK.

Distance sales: When a business in one member state supplies and delivers goods to a non-business customer (B2C) in another member state then the supplier may be liable to register for VAT in the customer’s member state if certain turnover limits are exceeded. This may be so in the instance of mail order or internet sales. E.G. a UK-based business supplies goods via a website to consumers across Europe. The UK business would normally charge UK VAT up to a certain turnover limit but once the sales threshold of the customers’ countries have been reached, the UK supplier must register for VAT in those countries.

Non-Established Taxable Persons (NETPs): An NETP is any person who is not normally resident in the UK, does not have a business establishment in the Uk and, in the case of a company, is not incorporated in the UK. NETPs who make taxable supplies; distance sales; or acquisitions in the UK above the relevant limits, must register and account for VAT in the UK.

An NETP who makes relevant supplies in the UK must register in the UK, irrespective of the value of those relevant supplies. A relevant supply is the disposal of a capital asset by the NETP in the UK, where the NETP’s purchase of the goods (or anything incorporated in them) included UK VAT which the NETP recovered under the EC’s 8th or 13th Directive refund arrangements.

Services from abroad: If you receive services from abroad you must take their value into account when working out whether you must be registered. You may still have to be registered, even though you make no other types of taxable supplies or the value of your other types of taxable supplies are below the registration limits.

Artificial separation of businesses to avoid VAT registration

Where a business has been artificially separated into smaller parts with the intention that the turnover of each part will be under the registration threshold, then such schemes will not work. HMRC have power to direct that the persons running these activities be treated as a single taxable person and be registered for VAT.

For a non-EU company intending to do business in the UK and EU generally it is very important to identify the correct type of VAT registration required. RKG Consulting will be pleased to assist.  For further information please follow the links below.