UK Residents
The current threshold in which you must mandatory register for VAT in the UK is £85,000 based on a rolling 12 months and not a calendar year, if you exceed this you must register for VAT within 30 days or you may face a fine. You are also able to voluntarily register for VAT which is a good idea if you expect a big growth of want to reclaim back VAT on purchases.
Other EU Country
If you are based in another EU country there are different requirements for registering for VAT in the UK. This is based on your amount of sales to the UK and where you decide to store your goods. You are required to register for VAT if;
- You store goods in the the UK; this requires an immediate VAT registration
- Your sales to the UK exceed the distance selling VAT threshold of £70,000
Non-EU Country
If you are based outside of the EU you may already be selling goods directly to EU Consumers including the UK. It’s likely your customers will be paying the import VAT on goods and provides a bad customer experience especially when selling on marketplaces and reviews are so important. In this case it is nearly always best to register for VAT in the countries you are selling goods to so you can charge the VAT on your consumer invoices and pay the VAT to the relevant tax office although this is voluntary.
If you store goods in the UK or any EU country this will also trigger a requirement for you to register for VAT
UK VAT Schemes
There are a number of different VAT schemes in t he UK open to businesses when applying for VAT
- The Flat Rate Scheme: This is for businesses with a turnover of less than £150,000. Under the flat rate scheme you pay a % of your turnover to the HMRC based on a lower VAT rate than the standard rate which is set by industry. The downside is you cannot reclaim VAT on purchases.
- Cash Accounting Scheme: This scheme is common among small businesses because you only need to pay HMRC the VAT income you’ve actually received during a quarter. This also means you cannot claim VAT back for any invoices that haven’t yet been paid. To qualify, businesses must have a turnover below £1.35 million.
- Annual Accounting Scheme: Instead of making quarterly returns, this scheme lets you make advance payments towards your VAT bill throughout the year. You then file on VAT return and pay the balance remaining or claim back a refund for any overpayments. This scheme is only elligible for businesses with a turnover below £1.35 million.
