The UK

VAT standard rate

20%

 

VAT reduced rate

5%

 

VAT zero-rated

0%

 

VAT calculation peculiarity

VAT= Total revenue * 20/120

 

Threshold

The thresholds for registering for VAT or joining a VAT accounting scheme from 1 April 2017. You must register your business for VAT with HM Revenue and Customs (HMRC) if its VAT taxable turnover is more than £85,000

 

The digital supplies threshold

The digital supplies threshold is £8,818. If the annual value of your total cross-border supplies of digital services to consumers in the EU in the current year and previous year is:

  • below the threshold, the place of supply is the UK
  • over the threshold, the place of supply is where the consumer is located

To work out the value of your digital sales, you must use the figures before VAT is added.

 

EU countries plus Norway and Switzerland threshold

If your business stays below €10,000 in cross-border sales of digital goods per year, throughout the EU, then you can charge the VAT rate of your home country on all those cross-border sales.

To work out the value of your digital sales, you must use the figures before VAT is added.

 

Businesses with B2C cross-border supplies of digital services within the EU that do not exceed a value of €100,000 per year have reduced VAT administrative obligations. These businesses are obliged to obtain only one piece of evidence in respect of their customer’s location (to determine where the VAT arising is due).

 

Pieces of evidence

If the total value of the cross-border digital sales:

  • is below £88,183 before VAT in the current year and previous calendar year, one piece of evidence is required (this cannot be ‘other commercially relevant information’)

  • exceeds £88,183, 2 pieces of non-contradictory evidence are required for that supply and all supplies after it

Examples of the type of supporting evidence that tax authorities will accept include:

  • the billing address of the consumer

  • the Internet Protocol address of the device used by the consumer

  • consumer’s bank details

  • the country code of the SIM card used by the consumer

  • the location of the consumer’s fixed landline through which the service is supplied

  • other commercially relevant information - for example, product coding information which electronically links the sale to a particular jurisdiction

 

Businesses using payment service providers

A business which makes cross-border digital service supplies must get and keep 2 pieces of information as evidence of where a consumer normally lives. This shows that the correct rate of VAT has been charged and will be accounted for to the correct EU member state tax jurisdiction.

 

 

Defining digital services (E-services list)

Radio and television broadcasting services

These include:

  • the supply of audio and audio-visual content for simultaneous listening or viewing by the general public on the basis of a programme schedule by a person that has editorial responsibility

  • live streaming through the internet if broadcast at the same time as transmission by radio or television

Telecommunications services

This means transmission of signals of any nature by wire, optical, electromagnetic or other system and includes:

  • fixed and mobile telephone services for the transmission and switching of voice, data and video, including telephone services with an imaging component, otherwise known as videophone services

  • telephone services given through the internet, including Voice over Internet Protocol (VoIP)

  • voice mail, call waiting, call forwarding, caller identification, 3-way calling and other call management services

  • paging services

  • access to the internet

It does not cover services just given over the telephone, such as call center help desk services.

Electronically supplied services

These rules only apply to e-services that you supply electronically and includes things like:

  • supplies of images or text, such as photos, screensavers, e-books and other digitized documents, for example, PDF files

  • supplies of music, films and games, including games of chance and gambling games, and programmes on demand

  • online magazines

  • website supply or web hosting services

  • distance maintenance of programmes and equipment

  • supplies of software and software updates

  • advertising space on a website

 

Registration procedure

You must register if you realize that your total VAT taxable turnover is going to be more than £85,000 in the next 30-day period.

You have to register by the end of that 30-day period. Your effective date of registration is the date you realized, not the date your turnover went over the threshold.

 

You must register if, by the end of any month, your total VAT taxable turnover for the last 12 months was over £85,000.

You have to register within 30 days of the end of the month when you went over the threshold. Your effective date of registration is the first day of the second month after you go over the threshold.

 

There’s no threshold if neither you nor your business is based in the UK. You must register as soon as you supply any goods and services to the UK (or if you expect to in the next 30 days).

 

Late registration

If you register late, you must pay what you owe from when you should have registered.

You may get a penalty depending on how much you owe and how late your registration is.

 

Most businesses can register online - including partnerships and a group of companies registering under one VAT number.

When you ca not register online. You must register by post using VAT1 if:

you want to apply for a ‘registration exception’

you’re joining the Agricultural Flat Rate Scheme

you’re registering the divisions or business units of a body corporate under separate VAT numbers

Register by post using form:

VAT1A if you’re an EU business ‘distance selling’ to the UK

VAT1B if you import (‘acquire’) goods worth more than £85,000 from another EU country

VAT1C if you’re disposing of assets on which 8th or 13th Directive refunds have been claimed

 

VAT returns filling date

You usually submit a VAT Return to HM Revenue and Customs (HMRC) every 3 months. This period of time is known as your ‘accounting period

Check your VAT Return and payment deadlines in your VAT online account.

It tells you:

  •  when your VAT Returns are due
  •  when the payment must clear HM Revenue and Customs’ (HMRC) account

The deadline for submitting the return online and paying HMRC are usually the same - 1 calendar month and 7 days after the end of an accounting period. You need to allow time for the payment to reach HMRC’s account.

 

Keeping records

You must keep VAT records for at least 6 years (or 10 years if you use the VAT MOSS service).

You can keep VAT records on paper, electronically or as part of a software program (such as book-keeping software). Records must be accurate, complete and readable.

Records you must keep include:

  • copies of all invoices you issue
  • all invoices you receive (originals or electronic copies)
  • self-billing agreements - this is where the customer prepares the invoice
  • name, address and VAT number of any self-billing suppliers
  • debit or credit notes
  • import and export records
  • records of items you cannot reclaim VAT on - for example business entertainment
  • records of any goods you give away or take from stock for your private use
  • records of all the zero-rated, reduced or VAT exempt items you buy or sell
  • a VAT account
  • You must also keep general business records such as bank statements, cash books, cheque stubs, paying-in slips and till rolls.
  • If you use the Cash Accounting Scheme you must use these records to match them against your payment records and receipts.

 

If you’ve signed up for Making Tax Digital for VAT, you must keep a digital record of anything that is needed for your VAT Return (your business name, address and VAT registration number, any VAT accounting schemes you use, the ‘time of supply’ and ‘value of supply’ (value excluding VAT) for everything you buy and sell, the VAT on everything you buy and sell. You must add all your transactions to your digital records, but you do not need to scan paper records like invoices or receipts.)