What VAT applies in the UK?

Kamil Kempisty
Updated: 28 April 2021

VAT has been in force in the UK since 1973 when the UK joined the European Union. The basic VAT rate in the UK is 20% and covers all products and services which are not covered by the 5% and 0% reduced rates.

Value-added tax (PTU) is a value-added tax, which is a tax on the increase in value of goods as a result of the production process or creation of services. VAT is an indirect tax, collected at each successive stage of trade in goods or services. VAT applies to both sellers and buyers of goods and services, as its value is added to the net value of the transaction.

VAT rates in the UK

VAT has been in force in the UK since 1973 when the UK joined the European Union. At the end of 2020, the UK is leaving the European Union >> Brexit guide The basic VAT rate in the UK is 20% and covers all products and services which are not covered by the 5% and 0% reduced rates.

VAT rate Indicated goods or services
20% All goods or services other than those indicated below
5% Some social housing, Some social services, Specific energy-efficient home installations and goods, Specific repairs of private dwellings, Specific medical equipment for the disabled, Electricity, natural gas and district heating supply for domestic use, LPG and fuel oil for domestic use, Child car seats
0% Some social housing, Printed Books, Newspapers, Magazines, Domestic waste collection, Water supply for households (except distilled and mineral water), Food and beverage supplies, Eat out, Pharmaceutical products on prescription, Specific medical devices for the disabled, Children’s clothing and shoes, Children’s diapers, Live animals for human consumption, Seed stocks, Cut flowers, Food-producing plants, Supply of animal feeds, Delivery of caravans, Delivery of houseboats, Specific construction work in new construction, Sewerage services, Intra-community and international passenger transport, Domestic passenger transport, Motorcycles, Bicycle helmets, Commercial ships and aircraft, Man Island private housing repairs

VAT number in the UK

The VAT number in the UK consists of 9 digits with a GB (Great Britain) prefix – for example, GB000000000. There is no UK (United Kingdom) prefix, as many people would think.

UK VAT invoice requirements

VAT invoices in the UK must be issued within 30 days of the taxable supply. The trader must keep the invoices for 6 years. VAT invoices in the UK must contain at least the following basic information:

  • Date of issue
  • Unique number
  • Supplier’s VAT number
  • Full supplier and customer addresses
  • Full description of services or goods supplied
  • Details of the quantity of goods
  • Delivery date (if different from the invoice date)
  • The net taxable value of the supply (expressed in £)
  • The unit price of delivered products and details of any cash discounts without VAT
  • Applied VAT rate
  • VAT amount
  • Details supporting zero VAT
  • Reference to “reverse charge,” if applicable
  • In case of invoicing of consumables, reference to “self-billing”
  • Where applicable, reference to any margin scheme applied
  • Details of the means of transport of goods
  • Total gross supply

When should I register for VAT in the UK?

VAT registration in the UK takes place at an office called HMRC – Her Majesty’s Revenue and Customs (a non-departmental department of the UK government responsible for tax collection in the UK). Non-established companies that supply goods or services taxable in the UK are required to register for VAT regardless of turnover. In the UK, VAT is settled quarterly before the end of the month and 7 days after the reporting quarter or monthly (if liabilities exceed £2.3 million) on the same basis. In addition, the trader should register for VAT in the UK if their business:

  • Imports goods to Europe via the United Kingdom
  • Buys and sells goods in the UK
  • Sells goods to consumers in the UK over the internet, after exceeding the distance selling threshold
  • Warehouses goods in the UK before further sale to other companies
  • Organizes ticketed events and exhibitions
  • Is not a trader other than VAT, but receives services in the UK on a reverse charge basis
  • Supplies goods on their own

Penalties and VAT interest in the UK

Failure to account for your income on time may result in interest or penalties being imposed by the UK tax office. The penalty for failure to register for VAT within 30 days of the obligation to register is a fine equal to the total VAT that was due during the unregistered period. The penalty for delay or total lack of VAT return is 15% of the unpaid tax. Incorrect or inaccurate returns are subject to penalties in the form of surcharges, which are calculated as a percentage of lost income. This percentage can reach up to 100%.

UK distance selling threshold

The distance selling threshold for UK taxpayers is £70,000.

Intrastat in the UK

In addition to the VAT return, foreign companies operating in the UK may be required to report Intrastat statistics. It contains information about the import or export of goods between countries belonging to the European Community as well as the movement of own goods to a warehouse located in another Member State. The threshold for Intrastat imports is £250,000 and the threshold for Intrastat exports is £1.5 million. The monthly Intrastat report should be submitted by the 21st of the following month.

UK tax office

The address of the UK tax office (HMRC) is: 100 Parliament Street, London, SW1A 2BQ The internet address is: https://www.gov.uk. You can contact the HMRC at +44 135 535 9022 Want to register for VAT in the UK? >> Contact us

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