VAT compliance and reporting rules in the UK 2024
Below is summary of the major rules provided under UK VAT rules (UK VAT Act). Check our country VAT guides for other jurisdictions.
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UK VAT country guide
| Highlights | Local term | Value Added Tax |
| VAT Rates - standard | 20% | |
| Rate news | ||
| VAT Rates - reduced | 5%; 0% | |
| VAT number format | GB 123456789 | |
| Registration threshold | £90,000 (April 2024) | |
| VAT Group | Yes | |
| VAT recovery foreign businesses | Yes | |
| Fiscal Representative | Not required for non-UK businesses | |
| Currency | Pound Sterling GBP £ | |
| Administration | Introduction | VAT was introduced in 1973 as part of the UK's accession to the European Union (EEC). The UK left the EU VAT regime after 31 December 2020 following the end of the Brexit transition period. Northern Ireland now has dual position within the EU VAT and Customs Union and the UK VAT and customs system for goods only. |
| VAT laws | UK VAT Act 1994. Value Added Tax Regulations 1995. Various HMRC notices that enjoy legal status. The UK is no longer subject to the EU VAT rules, Directive or ECJ. The EU-UK Trade and Cooperation Agreement includes terms on further cooperation on mutual tax claims and other issues. The Northern Ireland rules are largely contained within the 'Protocol' | |
| Tax Authorities | HM Revenue & Customs | |
| VAT Rates | Standard rate | 20% |
| Rate news | ||
| Reduced rates | 5%: domestic fuel and electricity; children car seats; certain energy saving and home insulation supplies | |
| Zero-rated | Exports; New dwellings; domestic power; food; children's clothing; transport; medicines; books; newspapers; e-books and journals; sanitary products (tampons) | |
| Exempt | Education; financial services; postal services; medical services; betting and gaming; certain cost sharing arrangements; charities; exempt importation | |
| Scope of VAT | Scope of VAT | Provision of domestic taxable goods and services; receipt of services or goods via the reverse charge; imports; imported sales of goods and electronic services to consumers (see distance selling section) |
| Time of supply | Goods & Services (general rule) | Goods when delivered to customer or removed from supplier. For services, the time of supply. An earlier invoice or advance payment will create and earlier tax point when VAT is due. |
| Reverse Charge | As per goods and services rule. But must be by 31 December at latest | |
| Continuous Services | At the time of issuing an invoice or making a payment | |
| Imports | At time of clearance into the UK. Postponed VAT Accounting (see separate section) available to avoid payment via VAT return | |
| Goods on approval and return | The earliest of: 12 months after sending goods; issuing an invoice; making a payment | |
| Registration | VAT registration threshold | £90,000 (April 2024) |
| Voluntary VAT registration | Yes | |
| VAT number format | GB 123456789 | |
| VAT Group | Yes for corporate (inc partnerships) bodies under common control. Some scope to include non-VAT holding companies. All members share a single VAT number and return, plus joint and severally liable. | |
| Non-residents | No major differences except nil VAT registration threshold | |
| Fiscal Representative | Not required for non-UK businesses with a UK VAT registration. However, HMRC retains right to impose fiscal representative obligation where poor compliance record. | |
| Digital Services | UK VAT on digital services rules | |
| Pre VAT registration costs | Deductions permitted for goods bought within four years of registration and services paid for within six months of registration | |
| VAT Invoices | Issuance | Within 30 days of the supply of the service or goods. Not required for retail sales unless requested |
| Content | Date; unique sequential invoice number; name and address of supplier and customer; Customer VAT number for reverse charge; date of supply or advance payment if different from invoice date; Description, quantity or units etc of supply of goods or services; price per unit; taxable amount; VAT charged; rate (broken out if supplies at different rates); total; explanation if zero-rated supply; type of supply; | |
| E-invoices | HMRC e-invoicing consultation | |
| Simplified invoices | £250 including VAT. Simplified VAT invoice does not have to display VAT amount separately | |
| Self-billing | Yes, if both parties sign agreement | |
| Retention of invoices | Six years minimum. No obligation to retain them within the UK - although they should be readably accessible. May be kept electronically | |
| FX rules | Foreign currencies may be used on an invoice calculation, but the VAT amount must be shown in GBP. Publicly published daily exchange rates may be used. | |
| Invoice corrections | Credit notes are permitted if issued within 30 days of any misstatement or error. It should include reference to the original invoice number | |
| Compliance | Right to deduct | Excluded:UK-based non-staff hospitality (food and drink) or entertainment provide to UK-only clients; non or partial business use motor vehicle cost. 50% only of leased cars used for private use |
| Call-off stock | Since 31 December 2020 when the UK left the EU VAT regime, the UK does off the VAT registration exemption for non-resident businesses moving stocks to a single UK customer. Instead, the goods must be first imported (VAT registration) and then sold to the customer as a domestic supply with UK VAT. | |
| Reverse Charge - B2B | B2B services provided by non-resident generally reverse charge. No use of the reverse charge on cross-border supply of goods (see next). Domestic reverse charge does apply on following goods: mobile phones and computer chips; telecoms services; wholesale gas and electricity; carbon credit trading; construction services (March 2021) | |
| Cash discounts | Supplier should indicate on original invoice VAT amount in the case a discount offer is taken up. This avoids necessity to issue credit note and fresh invoice. | |
| Bad debt relief | If invoice has remained unpaid after six months of invoice - invoice should have been reported in VAT return and VAT paid. Invoices related to non-VAT supplies are not entitled to bad debt relief | |
| Import VAT deferment | UK Postponed VAT Accounting rules | |
| VAT warehouse | No separate arrangements from customs facilities. Public or licensed customs bonded warehouses available | |
| Supply & install | Generally non-resident suppliers may use the reverse charge, and so avoid the obligation to UK VAT register | |
| Use and enjoyment services | Certain B2C services provided to foreign (now including EU) consumers may require local VAT registration. Eg, consulting; IP related; advertising services; financial services; staff hire | |
| Capital goods adjustment period | Movable property: five years. Immovable property: ten years | |
| Non-residents VAT recovery | Overseas businesses (now including EU) may apply via HMRC's online portal for quarterly and one final annual refunds of business-related VAT expenditure. The UK does require reciprocity agreements with foreign businesses' country of residence. Original invoices or import documents will be required for upload. | |
| VAT on Digital Services | Non-UK providers of digital or electronic services must UK VAT register to report UK VAT charges. The UK no longer participates in the EU's OSS single EU VAT return for e-services. | |
| Live events | VAT registration for the sale of tickets on the door | |
| Distance selling threshold for goods | N/a following the UK's departure from the EU VAT regime after 31 December 2020. Since 1 Jan 2021, all sales of imported goods to UK consumers not exceeding £135 are subject to UK VAT instead of import VAT at the border. Any UK or overseas seller must therefore be UK VAT registered, and calculate VAT in the checkout prior to sale. Marketplaces facilitating imports not exceeding £135 for UK and overseas sellers are now responsible for the UK. The same on overseas sellers with goods already in the UK at the time of sale - a facilitating marketplace takes over UK liabilities | |
| Cash accounting scheme | Taxpayers with an annual turnover not exceeding £1.35m my opt to use cash accounting instead of accruals-based VAT reporting. | |
| VAT registered cash tills | N/a | |
| Statute of limitations | Four years | |
| Other | Taxpayers may opt for a flat rate VAT scheme if sales not exceeding £150k per annum. There are a range of special VAT schemes for retailers. Since phase II of Making Tax Digital for VAT (April 2021) VAT records must be stored digitally with digital links between accounting, invoice or similar systems - no manual intervention | |
| VAT Returns | Frequency | Quarterly, with all taxpayers allocated into 1 of 3 'staggers' with different reporting dates. Large taxpayers or traders with regular credit balances (e.g. exporters) subject to monthly VAT returns. Voluntary annual returns for businesses with turnover not excluding £1.35m |
| Filing method | Electronic via HMRC's Making Tax Digital API-based portal for all VAT registered businesses | |
| Deadlines (inc payments) | Filing by 7th of the second month following the reporting quarter or month. Payments should be made by the same date. Taxpayers with annual liabilities above £2.3m must also make interim payments on account at the end of the second and third month of each reporting quarter. A third, balancing payment is then due by the regular deadline. Taxpayers on annual VAT returns should file by the end of the second month following the reporting year. They must also make interim payments: nine monthly advance payments; or three quarterly payments with a balancing payment with the annual return. | |
| VAT credits | VAT refunds in a VAT return are remitted automatically | |
| Corrections | Adjustments not exceeding £10,000 (or less than 1% of box 6 sales) may be reported through the next VAT return. A correction letter must be sent for errors above this | |
| Non-residents | No material differences. Foreign taxpayers should comply with the UK's MTD for VAT rules on filing and digital records | |
| Other filings | As the UK left the EU VAT regime after 31 December 2020, European Sales Listing and Intrastat are no longer required. The exception is Intrastat Arrivals, which must still be filed monthly be the 21st of the month following. This applied only for 2021. The arrivals threshold remained £1.5m. There is no requirement for dispatch reporting. Northern Ireland to EU trading still requires full ESL (goods and services) and Intrastat reporting. | |
| SAF-T | N/a | |
| Penalties & interest | 2023 new VAT penalty regime | |
| B2C Distance Selling returns | 2021 UK e-commerce VAT rules |
