How to Register an Overseas Business for UK VAT

If your business is based outside the UK, it is necessary to register for UK VAT if it intends to or currently makes supplies of goods or services to UK customers, where the place of supply is classed as being the UK. This is one of the most basic rules of trading legally in the UK for overseas businesses.

Unlike British companies, overseas businesses do not have the benefit of being able to wait until their sales exceed a certain threshold before having to register for VAT, meaning this is a process that needs to be completed as a matter of high priority.

Failure to register for VAT can result in significant financial penalties. If trading via an online marketplace, it is also likely to result in the platform operator acting against the business.

Here, we explore the basic steps that must be taken for an overseas company to register for VAT, and some of the factors that businesses should consider to make this process as smooth as possible.

When to register for VAT

If your business is based outside the UK, you are required to register for VAT as soon as you make any supplies of goods or services that are subject to UK VAT under the place of supply rules.

Failure to do so means you will need to pay HM Revenue & Customs (HMRC), the UK tax authority, any VAT your business owes from the date on which you should have VAT registered. Your business may also incur a financial penalty for failing to notify HMRC of registration at the correct time.

For businesses that are based in the UK, a minimum threshold applies before VAT registration is required. The same threshold DOES NOT apply to non-UK established businesses, creating an immediate liability to register as soon as a single supply of goods or services is made, and where the place of supply is classed as being the UK.

How the VAT registration process works

Registering for VAT is generally undertaken by an online application, although there may be a handful of situations in which a paper application form would be sensible - for example, if there is a complex background issue to the registration, or a mandatory requirement from HMRC.

Generally, overseas businesses are required to provide evidence to satisfy HMRC that they meet stringent anti-money laundering checks and are a credible business, which can make the registration process more complex. Once the registration process is complete, your business will be assigned a VAT registration number from HMRC.

What happens next?

Once you have registered for VAT, you will be expected to submit your VAT returns online to HMRC and pay your VAT returns, based on the current rate of VAT in the UK applicable to the goods or services that your business supplies.

Consult the official HMRC website to check the current VAT rate.

How can VAT registration details be changed?

You will need to keep your VAT registration details up to date by informing HMRC of any relevant changes to your circumstances, including:

• Changes to the name, trading name or main address of your business
• A change to the accountant or agent who deals with your VAT
• Changes to the members of a partnership
• A switch in your current banking details

You must inform HMRC of these changes within 30 days or face a financial penalty; in the case of changes to banking details, this must be done at least 14 days in advance.

It is also possible to transfer a VAT registration from one business to another when a merger or buyout happens, which may require the previous owner to cancel their VAT registration before moving your number across. This process takes around three weeks to complete.

Ceasing to trade in the UK

If your business ceases to trade in the UK, it can apply to deregister for UK VAT. Please note that deregistration can result in more VAT being owed to HMRC in certain circumstances. It is always worth taking advice on this point before applying to deregister.

FAQs for UK VAT Registration for Overseas Companies

Do overseas companies need to register for VAT in the UK?

Whether an overseas company is required to register for VAT in the UK is dependent on the nature of supplies made. For example, when an overseas business imports goods into the UK, acting as the importer of record, the usual VAT registration thresholds do not apply and an obligation to register arises. This is also the case where an overseas business buys and re-sells goods, or stores their own goods in the UK. With respect to supplies of services made to UK businesses, the place of supply should be considered. Certain supplies that are exceptions to the general rule, for example, services relating to land in the UK, will require the overseas supplier to register for UK VAT. If an overseas company makes supplies in the UK, it must be compliant with VAT regulations. This ensures fair competition and compliance in dealings with any UK company. It's crucial for such companies to seek professional advice to navigate the registration process effectively.

What are the implications of not registering for VAT as an overseas company in the UK?

If an overseas company fails to register for VAT where an obligation arises, it potentially faces significant risks including penalties and interest charges on unpaid VAT. This non-compliance can also negatively impact the reputation of the overseas and impede its ability to conduct trade in the UK effectively. It's therefore imperative for overseas companies to seek professional advice to understand their VAT obligations and maintain compliance.

What are the benefits of VAT registration for overseas companies in the UK?

VAT registration can offer numerous benefits for an overseas company operating within the UK. It enables the overseas company to reclaim VAT paid on business expenses in the UK, which can significantly reduce costs. This can enhance the competitiveness of an overseas company in the UK market. Additionally, being VAT registered can enhance the perception of the overseas company as a serious and established player in the UK, which can be beneficial for its existing business relationships and future growth.

What information/documents are required for VAT registration in the UK as an overseas company?

An overseas company needs to provide several key pieces of information and documents for VAT registration. This includes proof of business activities in the UK, details of any existing business operations and identification documents for directors. Since navigating VAT requirements can be complex, it is advisable for every overseas company to seek professional advice to ensure all procedures are correctly followed.

What ongoing compliance obligations do overseas companies have after VAT registration in the UK?

Once registered for VAT, an overseas company must fulfill various ongoing compliance obligations. These include filing regular VAT returns, maintaining detailed records of all taxable transactions, and making timely VAT payments. Adhering to these requirements is essential for the overseas company to maintain its good standing and support its existing business in the UK. Companies House and VAT regulations can be complex, hence ongoing professional advice is recommended.

These FAQs are designed to help overseas companies understand and manage their VAT registrations and compliance in the UK. Given the complexities involved, especially in navigating international trade and VAT laws, overseas companies should consistently seek professional advice to ensure thorough compliance and successful operation in the UK market.