UK VAT For Overseas Companies
Value added tax (VAT) is a form of sales tax that is applicable to majority of the services and goods in the United Kingdom, and to the goods that get imported from outside the European Union (EU). Ever since the introduction of rules and regulations of VAT in 1973, international companies are often skeptical about its effect on their business. Well, the laws are constantly evolving and thus it would be difficult for an international firm without proper VAT resources to track new legislation, modified HM Revenue & Customs (HMRC) interpretation and new case studies.
If you are the owner of an overseas company and want to trade internationally, then you must familiarize yourself with the tax laws of governing countries. At this point, most of the businesses consider professional help for much-needed assistance, but to help you get started this article provides a complete overview of fundamental EU VAT principles.
Key Responsibilities That Overseas Companies Have to Handle
There are many issues that overseas companies must be aware of when they are planning to establish their business in UK, or selling customers in UK. These are typically dependent on whether the business is aimed towards exporting or importing goods and services.
For those overseas business that want to import:
- Your company has to clear goods through the customs and pay taxes, if required.
- Your supplier should provide required documentation for clearing the goods via customs
- VAT procedures are based on whether you are acquiring goods outside the EU or importing them from EU countries
- For those goods that are imported outside from the EU countries are subjected to import duty
- The responsibility of a company is based on the terms that they have accepted in a contract and for reducing any sort of disputes, the contract has to recognized internationally according to Incoterms.
On the other hand, for overseas business that has to perform exports have to make sure that:
- Your company stands responsible for the clearance of goods that move outwards through the UK customs.
- Your customer should take care of the overseas taxes and custom clearance and the customer should be provided with documentation needed for clearing the goods
- The export procedure is influenced by the fact whether you are exporting outside EU countries or inside.
When Must Overseas Business VAT Register in the UK?
Any overseas business have to register VAT when the taxable turnover level (i.e. sales that are subjected to rules of VAT at 5%, 20% or 0%) exceeds or is expected to move beyond the threshold. When a particular company gets registered then it has to take an account of VAT on the total value of the taxable supplies. It can also reclaim the VAT on importation or purchase of services and goods that it incurs. The net balance can be paid or reclaimed from HMRC.
Thus, registering for VAT in the UK is inevitable if the overseas companies:
- Conducts taxable supplies to the UK in the form of goods and services for development of the business. The supplies can be of any form, however are commonly include sales of the goods that are physically located in UK or their operations in specific events occur at UK.
- Business is VAT registered for another country of EU and delivers or sells goods in UK to non-VAT registered customers- this practice is called as distance sales and the net value of this sale exceeds relevant threshold.
- Acquires goods directly in the UK from suppliers who are VAT registered in other countries of EU and the total sum of acquisition is more than the acquisition threshold.
- Makes a claim under the EU 13th Directive or EU 8th Directive and simultaneously supplies the goods and services to the UK.
If these requirements are met, then the company is carrying out a supply to UK and no matter where the technical resources or staff are located, the rules underlying VAT in the UK remain applicable to the company.
But, you don’t necessarily have to register if the supplies are made to customers who are liable to VAT as under the reverse charge norms. Further, overseas companies should even be registered if they have just began with a business that deals with taxable supplies, provided they can use this for showing their intention of going for taxable supplies in future, as a critical part of their business expansion. Similarly, if the turnover remains below the required threshold, and they are able to prove HMRC that the company creates taxable supplies and is operating for the VAT purposes.
How Long Does it Take To Become A VAT Registered Company in The UK?
Becoming a VAT registered company in the UK is relatively fast, while most of the time goes into collecting the essential information and the related formalities of application. Once companies have filed the application, tax authorities may ask further information or additional questions. It takes about five weeks for issuing the VAT number to overseas companies that want to operate in the UK.
Where Should The VAT Registration Application Be Submitted?
Overseas companies have to fill the VAT registration form 1 for supply of taxable services or goods to UK and the Form 1 A in case of distance selling into UK. It should noted that, the applicants are expected to have a bank account in the UK, as without the account the VAT dues has to paid in the form of check along with a written note attached to the application. While in case of refunds, the authorities will perform electronic transfer to the designated foreign bank accounts.
If the companies consider using the services of an agent for registering on their behalf, then they are allowed to carry out the process online or through local registration unit for VAT in the UK. The rules specific that non-EU companies have to fiscal representatives or an agent who remains jointly liable for interests, penalties and taxes that are due.
What is UK VAT Returns?
The overseas companies who have a valid VAT number have to submit timely VAT returns, mentioning proper details about their taxable supplies and the inputs. The returns have to be filled either quarterly or monthly in the UK. The VAT returns that are due a calendar month and seven days after the specified VAT period. Businesses can opt for a professional services to file them online, as it is a mandatory procedure. Apart from returns, companies have to provide other important statistical information. The intrastat system of UK needs monthly returns regarding movement of goods between members of EU countries and the UK. There are also annual thresholds present for these kinds of filings.
Why Services of a Reputable Professional Counts?
By choosing a qualified VAT agent, the overseas companies can take advantage of innumerable services and these includesubmission of VAT returns, registration and de-registration, tax applications, attendance at the HRMC visits, mitigation and negotiation of penalties, calculating partial exemptions and general correspondence with the HMRC.
In addition to that, the services of a dependable VAT agent can be useful as they make it a point to deliver:
- Effective suggestions to the international businesses associated with the obligations of registering for VAT in the UK and the various EU countries.
- Assisting the overseas companies with application procedure and acquiring a VAT registration number, Duty Deferment and EORI approval.
- Advice on the different steps that can be taken for structuring an impactful business in the UK and optimization of VAT position.
- Informing about the VAT liabilities that may arise and the latest trends in rules and regulation of VAT.
When it comes to successfully expanding your international business in the UK, never forget to stay register for VAT and remain in compliance with the latest regulations and laws that are administered by HRMC.
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Related pages: VAT Registration Service
