United Kingdom

This guide is for e-commerce companies that sell online via web stores or at marketplaces.
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VAT Standard rate

The standard VAT rate in the United Kingdom in 2024 is 20%.

VAT Reduced rate

5%

Some goods and services, for example, children’s car seats, mobility aids for the elderly and smoking cessation products – nicotine patches and gum.

0%

  • Equipment for disabled people;
  • Sanitary protection products;
  • Low vision aids.
See the summary of the EU VAT rates.

VAT standard rate

The standard VAT rate in the United Kingdom in 2024 is 20%.

VAT reduced rate

5% and 0%.
VAT Standard rate 20% VAT Reduced rate 5%, 0% Thresholds £70.000, £85.000
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Thresholds

As the UK left the EU distant sales threshold no longer applies to distant sales to the UK. The exemption is sales between Northern Ireland and the EU. The distant sales threshold is £70,000 for goods sold from The EU to Northern Ireland customers. As the UK left the EU distant sales threshold no longer applies to distant sales to the UK. The exemption that exists for goods between Northern Ireland and the EU doesn’t include sales of services. That means that for non-UK businesses VAT registration obligation starts from the first B2C sale. For UK-based businesses, there is a local sales threshold of £85,000. That threshold is only applicable to UK-established businesses selling to UK customers.

Deductible VAT 

If goods or services were used to make taxable supplies in the UK, VAT in input invoices might be credited. For example:
  • VAT paid at custom clearance with your EORI number;
  • VAT paid to the UK suppliers.
You may be able to reclaim VAT paid on goods or services bought before you registered for VAT if the purchases were made within certain time limits.

Registration procedure

To register, you need to create a personal account on the website of the tax department and send an online application. Usually, the application is considered within 30 days. After that, Tax Team may send you an additional request for documents or information.

VAT payment date

The deadline for VAT payment coincides with the deadline for submitting the VAT declaration.

Filing VAT returns

You must submit your return online to HMRC unless:
  • Your business is subject to an insolvency procedure – if you have a Company Voluntary Arrangement or an Individual Voluntary Arrangement you can submit your return online if you want to;
  • You object to using computers on religious grounds;
  • You can not because of your age, a disability or because of where you live, for example, you do not have internet access.
The Lovat platform supports digital submission. You usually submit a VAT Return to 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 is necessary to submit declarations no later than 7 days in the second month following the reporting period.

Penalties

HMRC can charge you a penalty of up to:
  • 100% of any tax under-stated or over-claimed if you send a return that contains a careless or deliberate inaccuracy;
  • 30% of an assessment if HMRC sends you one that’s too low and you do not tell them it’s wrong within 30 days;
  • £400 if you submit a paper VAT return unless HMRC has told you you’re exempt from submitting your return using your VAT online account or Making Tax Digital compatible software.
Penalties for late filing of VAT returns in the UK are based on a point system. One point is awarded for each VAT return filed late. If a business reaches the points threshold, it will be liable to pay a fixed penalty of £200 (about €235). The threshold is a fixed maximum number of points a business can receive. It depends on the reporting period – annual, quarterly, monthly (2, 4 and 5 points respectively). If a business reaches the threshold, it will have to pay an additional penalty of £200 for each late filing of a UK VAT return. Penalties for late payment are charged at a rate of 2.5% from the day VAT is due until the day it is paid in full. If a business is more than 15 days late in payment, it will have to pay the first late payment penalty. If the payment is overdue for more than 30 days, a second late payment penalty will be charged.

E-Invoicing in UK

The UK government currently requires e-invoicing only for public sector procurement with the National Health Service (NHS) being mandatory since 2014 and all central government departments and most local authorities since April 2020. While there’s no current mandate for B2B transactions, the government hasn’t ruled out making it mandatory in the future. Here’s why: The UK government is not opposed to making e-invoicing mandatory for B2B transactions, but they haven’t announced a specific timeline yet.

Threshold

As the UK left the EU distant sales threshold no longer applies to distant sales to the UK. The exemption that exists for goods between Northern Ireland and the EU doesn’t include sales of services. That means that for non-UK businesses VAT registration obligation starts from the first B2C sale.

Pieces of evidence

Examples of the type of supporting evidence that tax authorities will accept include:
  • The billing address of the buyer;
  • The IP address of the device used by the consumer;
  • buyer’s bank details;
  • The country code of the SIM card used by the buyer;
  • The location of the consumer’s fixed landline through which the service is supplied;
  • Other commercially relevant information – for example, product coding information that electronically links the sale to a particular jurisdiction.
We strongly advise you to keep proof of the seller’s location, which can confirm the correctness of the calculated VAT.

Defining digital services (E-services list)

Radio and television broadcasting services, which include:
  • Provision of audio and audiovisual content for simultaneous listening or viewing by the general public based on the schedule of programs by the person in charge of editorial;
  • Live streaming through the internet if broadcast аt the same time as transmission by radio or television.
Telecommunications services mean the transmission of signals of any nature by wire, optical, electromagnetic, or other system and include:
  • 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 are 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.
Electronically supplied services – these rules only apply to e-services that you supply electronically and include 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 programs on demand;
  • Online magazines;
  • Website supply or web hosting services;
  • Distance maintenance of programs and equipment;
  • Supplies of software and software updates;
  • Advertising space on a website.
Digital services taxation rules do not apply to services provided only by telephone, such as call center support services.

Registration procedure

If your supplies are liable to UK VAT you will need to register for UK VAT if you are based outside the UK. To register, you need to create a personal account on the website of the tax department and send an online application. Usually, the application is considered within 30 days. After that, Tax Team may send you an additional request for documents or information.

VAT returns filing date

The standard VAT tax period is a quarter. You can check your VAT Return and payment deadlines in your VAT online account. It is necessary to submit declarations no later than 7 days in the second month following the reporting period.

Keeping records

You must keep VAT records for at least 6 years. 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;
  • Debitor 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).

Penalties

Penalties for late filing of the declaration from 2 to 15 percent. The amount of the fine depends on the number of months of delay and the annual turnover.

E-Invoicing in UK

The UK government currently requires e-invoicing only for public sector procurement with the National Health Service (NHS) being mandatory since 2014 and all central government departments and most local authorities since April 2020. While there’s no current mandate for B2B transactions, the government hasn’t ruled out making it mandatory in the future. Here’s why: The UK government is not opposed to making e-invoicing mandatory for B2B transactions, but they haven’t announced a specific timeline yet.
October 2, 2024 65
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