Registering for UK VAT when selling, moving and installing goods

The UK’s VAT rules for supplies of goods generally mean that any items sold within or imported into the UK are subject to VAT. This means that businesses in retail and manufacturing often need to become UK VAT registered.

Many businesses end up facing penalties because they fail to register for UK VAT at the right time. To avoid these plus also ensure that for imported goods they are not delayed at the border or customers hit with unexpected costs, it’s important to understand when to start accounting for VAT on sales and the obligations created when embarking on new activities. This is particularly important for EU businesses who now face UK VAT obligations that didn’t exist before Brexit.

Is establishment important?

It is because different rules apply depending on a business’ status. A business is considered as established in the UK for VAT purposes it needs a permanent physical presence with the resources to make and receive supplies. If its fundamental management decisions and the day to day running of the business are carried out from the UK, it is likely to be deemed to be established here.

If you have an establishment in the UK, it’s possible to benefit from a registration threshold. This is currently £90,000 and needs to be exceeded before a compulsory requirement to register is created. We have covered further information for established businesses trading in the UK.

Businesses which are not established in the UK but do have a VAT registration obligation are referred to as Non-Established Taxable Persons (NETP). This obligation will nearly only ever be created as a result of supplying goods, because without an establishment they cannot be deemed to make or receive supplies of services in the UK.

Common registration scenarios

We’ve provided below some example scenarios to help you start to understand when an application to register might have to be made to HMRC.

1. A US established business owns electrical goods held in a warehouse in Manchester, UK. It will be selling and distributing these goods in the UK.

As the goods will be located in the UK when sold, they will be subject to UK VAT. Businesses that are not established in the UK do not benefit from the UK VAT registration threshold and hence UK VAT will apply with effect from the first sale. A registration will be needed to account for that VAT.

2. An online retailer is selling goods to private individuals via its own website and an Online Marketplace (OMP). The goods retail and will be sent from the Netherlands to the UK in consignments valued at between £25 and £250.

For the consignments valued at less than £135, no import VAT or duty will be due they arrive in the UK. However, the sale of them is subject to UK VAT and that needs to be charged at the point of sale. For the sales via the retailer’s website, the VAT on those needs to be accounted for by the retailer. For the items sold via the OMP, the OMP accounts for the VAT (and hence the retailer doesn’t have to register). These rules apply whether the business is UK established or not.

For consignments valued at more than £135, import VAT and duty will apply upon arrival into the UK. The party liable to pay these taxes will be that marked as the importer of record, which the commercial arrangements will have determined. If that party is the retailer, they will likely have to register for UK VAT (subject to their establishment status and value of supplies). An OMP does not have to account for VAT on behalf of the retailer for consignments of these value.

3. I’m going to install goods in a UK located building, do I have to register?

The installation of goods into the fabric of a building or land is treated for UK VAT purposes as supplied wherever the building or land is located. As a starting point therefore, the supplier needs to register for UK VAT.

However, there are easements available whereby the registration can be avoided as the customer can be made to account for the VAT instead (via a reverse charge). These generally only apply though when the goods being installed are imported into the UK (or if installation is in Northern Ireland, moved from an EU Member State) and it is going to be a one-off supply.

Each supply chain will be different though and so due to the potential complexities we strongly recommend any businesses impacted by this to review each supply in turn to consider their registration obligations.

4. An overseas business with no UK presence provides an accountancy helpline service to business customers in the UK.

Most supplies of services made on a B2B basis are deemed to be supplied ‘where the customer belongs’. This means that a business on established in, say, South Africa which is supplying support services to a UK business is making supplies subject to UK VAT.

However, UK VAT rules state the customer is required to account for the UK VAT due on behalf of the seller. They do so on their own VAT return using the reverse charge mechanism.

We would flag that there are some exceptions to this general place of supply rule which means some services will be subject to VAT in different places or the seller is required to register. In this case though the seller would not be required to register for VAT in the UK as their customer is obliged to account for the VAT due on its behalf.

At Crowe we are happy to organise an initial call to talk through your business activity and help you understand your VAT registration obligations in the UK. If you would like to discuss this further, please contact Rob Janering, or your usual Crowe contact.