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UK Confirms VAT Changes For Non-Established Businesses

by Robert Lee, Tax-News.com, London

03 December 2012


The UK tax authority, HM Revenues and Customs (HMRC), has published a note to remind traders that from December 1, 2012 the UK value-added tax (VAT) registration threshold does not apply to non-established taxable persons (NETPs).

Brief 31/12 explains that NETPs will be required to register for UK VAT when they make their first supply of goods or services in the country regardless of the value. NETPs who are already making supplies in the UK are required to register for UK VAT with effect from December 1, 2012.

The change in the law follows a decision in the European Court of Justice which confirmed that only businesses established in a member state can benefit from its domestic VAT registration threshold. Previously the UK VAT registration threshold applied to NETPs who made taxable supplies in the UK, as well as to UK businesses.

From December 1, 2012, any non-established business which makes or intends to make taxable supplies in the next 30 days has 30 days from the date it formed that intention to notify HMRC that it is required to register for VAT. Businesses which become required to register in the UK on December 1, 2012 will have to notify HMRC of that fact by December 30, 2012.

A business not established in the UK will be required to register from the earliest date that it made or expected to make taxable supplies in the UK (but no earlier than December 1, 2012).

Existing UK place of supply rules have not been changed. Overseas businesses making only reverse charge supplies of services to the UK will not normally be affected by the removal of the threshold. However, there are some exceptions that are taxable supplies in the UK where they are supplied to a private customer rather than to a business, for example, services in connection with land which is located in the UK or entertainment services when the performance takes place in the UK.

Overseas businesses only involved in distance sales or acquisitions are not affected by the removal of the VAT registration threshold.

TAGS: tax | business | value added tax (VAT) | law | United Kingdom | services

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