Charging VAT on goods sold direct to customers in the UK

There are different rules if you:

• sell goods from the EU to customers in Northern Ireland, who are not registered for VAT in the UK
• move goods between Northern Ireland and the EU

Check if you’re an overseas seller or established in the UK for VAT purposes

You’re an overseas seller if you do not have a UK establishment.

Check if UK business establishment exists

A UK business establishment exists if either of the following conditions are met:

a). A business establishment is in the UK and is the place where:

• essential management decisions are made
• the business’s central administration is carried out

b). A business has a fixed establishment in the UK. This is a permanent physical presence with the human and technical resources to make or receive taxable sales.

Consider if you’re genuinely established in the UK

The business establishment is the place where the business is run from. This is usually the head office or headquarters.

The business must have a real presence in the UK for a fixed establishment to exist. It must be genuinely operating from the UK.

Any of the following criteria are unlikely to be sufficient by themselves to demonstrate UK establishment. For example, if a business:

• is incorporated in the UK
• has a registered, serviced or virtual office
• has an address in the business name

Goods outside the UK when they are sold

You must work out the consignment value of the goods by deciding their ‘intrinsic value’. This is the price the goods were sold for, not including:

• transport or insurance costs — unless they’re part of the price and not shown separately on the invoice
• any other taxes and charges

Consignments valued at £135 or less

There are different rules for:

• consignments of goods containing excise goods, this includes alcohol and tobacco products — find out more about importing excise goods to the UK
• consignments of goods from Jersey and Guernsey, if VAT is collected and paid to HMRC under the Import VAT Accounting Scheme

To do this you will need to:

• know the precise nature of the goods to find out the correct rate of VAT to charge
• register for VAT in the UK
• keep records of the goods sold, and make sure you get accurate information to apply the correct VAT treatment to them

Goods valued at £135 or less sold to UK VAT registered businesses

You will not need to charge and account for VAT if the customer is a VAT registered business. The VAT registered business customer will be required to account for any VAT due instead.

You should:

1. Ask for their VAT number.

2. Confirm it is correct — use the check a VAT number online service.

3. Add a note to the invoice (for example, by writing ‘reverse charge: customer to account for VAT to HMRC’).

4. Send it to the business customer.

You do not have to register for VAT if you only sell goods that are outside the UK at the point of sale to UK VAT registered businesses. The UK VAT registered business will be responsible for accounting for the VAT.

VAT registered businesses receiving goods valued at £135 or less bought direct from an overseas seller

If the goods are sold to a business customer in Great Britain (England, Scotland and Wales), the business receiving goods should account for the VAT on their VAT return using a ‘reverse charge’ procedure.

If the goods are sold to a business customer in Northern Ireland from outside the EU, the business receiving goods may account for the VAT using postponed VAT accounting or any other means of paying import VAT.

Wherever the goods are sold to, the business customer will be able to recover the VAT as input tax on the same VAT Return subject to the normal recovery rules.

Consignments valued more than £135

Read more information about importing goods and how much tax and duty you’ll need to pay.

If you make changes to the consignment so that its total value goes above £135 the consignment may be subject to import VAT and Customs Duty, and you may have to adjust the VAT already accounted for at the point of sale.

Goods in the UK when they are sold

If you are an overseas seller and you sell goods of any value that are located in the UK at the point of sale you must:

• register for VAT
• charge VAT
• account for VAT

Zero-rated and exempt sales

Zero-rated goods include:

• most food
• children’s clothes

If you are an overseas seller and all your sales are zero-rated you should register by post using a VAT1 form and apply for exemption from registration.

If all your sales are exempt, you do not have to be registered and will not be able to register for VAT.

To find out more about zero-rated and exempt sales, read about VAT rates on different goods and services.

How to register for VAT

You can register for VAT online.

When you register for UK VAT, you’ll be registered at the address of your principal place of business. This is where official correspondence will be sent.

The principal place of business is where orders are received, managed and the day to day running of the business takes place. This should not be a mail forwarding or registered office address.

Using an agent

You can only have one person at a time as your agent (although an agent can act for more than one person or business).

If you choose to use an agent:

• you’ll need to give your agent enough information to allow them to keep your VAT account, make your returns and pay VAT on your behalf
• your agent must register with HMRC for an agent services account

You’ll need to give authority before we can deal with them. You can do this by:

• using a digital handshake
• sending a letter to us

After you’ve registered for VAT

Once you’re registered for VAT, you must:

• charge VAT at the correct rate on your UK sales
• account for, and pay VAT to HMRC
• declare your total sales (including zero-rated sales) on your VAT return

VAT records

You must keep full records (including VAT invoices) for 6 years from the date any goods are sold.

Find out more about VAT record keeping.

Compliance checks

HMRC carries out compliance checks to:

• make sure you’re paying the right amount of tax at the right time
• make sure you’re getting the right allowances and tax reliefs
• prevent tax evasion
• make sure the tax system is operating fairly