Executive Summary
An overseas business without a UK establishment may have to register for UK VAT as soon as it makes, or expects to make, any taxable supply in the UK.
The normal VAT registration threshold generally does not apply to a non-established taxable person, or NETP. This means even a small amount of UK taxable activity can trigger registration.
Registration commonly arises where an overseas seller:
- Holds stock in the UK;
- Sells imported goods directly to UK consumers;
- Supplies digital services to UK consumers;
- Makes UK land-related supplies; or
- Makes services taxable in the UK where the reverse charge does not apply.
Online marketplace rules can shift responsibility to the platform, but they do not remove every VAT obligation.
| Activity | Likely VAT position |
| Goods stored in the UK and sold directly | Registration generally required |
| Goods sold through an online marketplace | Marketplace may account for VAT |
| Digital services sold directly to UK consumers | Registration generally required |
| General B2B services supplied to a UK business | Customer may apply the reverse charge |
| UK property-related services | Registration may be required |
| Only exempt UK supplies | Registration normally unavailable |
| Only zero-rated supplies | Exemption from registration may be requested |
What Is a Non-Established Taxable Person?
A non-established taxable person is a business that makes taxable UK supplies but does not have a UK business or fixed establishment.
A UK establishment normally requires either:
- Central administration and essential management decisions in the UK; or
- A permanent UK presence with sufficient human and technical resources to make or receive taxable supplies.
A registered office, virtual office, postal address or UK company registration is not necessarily enough by itself to establish the business for VAT purposes.
Important: VAT registration does not itself mean that the overseas business has a UK permanent establishment for Corporation Tax. The VAT and direct-tax tests are different.
Is There a VAT Registration Threshold?
Generally, no.
An overseas business without a UK establishment must usually register where it makes any taxable supply in the UK or expects to do so shortly. HMRC should normally be notified within the required registration period once the liability arises.
A taxable supply includes:
- Standard-rated supplies;
- Reduced-rated supplies; and
- Zero-rated supplies.
Exempt supplies are not taxable supplies. If all UK supplies are exempt, the business will generally be unable to register.
Where all UK supplies are zero-rated, the overseas business may be able to request exemption from registration rather than filing VAT Returns solely to report zero-rated sales.
Overseas Sellers Holding Goods in the UK
An overseas seller that owns goods located in the UK when they are sold directly to customers must generally register for VAT and account for VAT on those sales.
This commonly applies where goods are held in:
- A fulfilment centre;
- A third-party warehouse;
- A marketplace warehouse;
- A consignment-stock location; or
- Premises operated by a logistics provider.
Using an independent warehouse does not normally prevent VAT registration. The important question is where the goods are located when ownership passes to the customer.
The seller should also confirm:
- Who imports the goods;
- Who is named as importer of record;
- Who pays import VAT;
- Whether import VAT can be recovered;
- Who issues the customer invoice; and
- Whether the goods are sold directly or through a marketplace.
Goods Sold Directly From Overseas
Special rules apply where goods are outside the UK when sold and are then sent directly to a UK customer.
For lower-value consignments sold directly to UK consumers, the overseas seller may be required to charge UK VAT at the point of sale rather than allowing VAT to be collected only at importation.
Where goods are sold to a UK VAT-registered business and the required evidence is obtained, the UK customer may be responsible for accounting for VAT under the relevant reverse-charge procedure.
Higher-value consignments normally remain subject to the usual import VAT and customs rules.
Sales Through Online Marketplaces
An online marketplace may be treated as making the sale for VAT purposes in certain transactions involving overseas sellers.
This commonly applies where:
- Goods are located in the UK and sold by an overseas seller to a consumer; or
- Qualifying goods are outside the UK when sold and sent to a UK consumer.
In these cases, the marketplace may collect and account for VAT on the consumer sale.
However, the overseas seller may still need VAT registration where it:
- Makes direct sales outside the marketplace;
- Sells to UK VAT-registered businesses;
- Needs to recover import VAT;
- Holds goods in Northern Ireland;
- Transfers or exports its own stock; or
- Makes other taxable UK supplies.
The seller should provide its VAT registration details to each marketplace where required and ensure that the business name matches HMRC’s records. Marketplaces may restrict sellers whose VAT details cannot be verified.
VAT on Services Supplied From Overseas
The VAT treatment of services depends on the place-of-supply rules.
Services supplied to UK businesses
Many general business-to-business services are subject to the reverse charge. The UK customer accounts for VAT instead of the overseas supplier.
Where every UK service is subject to the reverse charge, the overseas supplier may not need—or be entitled—to register for UK VAT.
Services supplied to UK consumers
Different rules apply to business-to-consumer services.
An overseas supplier may need to register where the service is treated as supplied in the UK. Examples can include:
- Digital services;
- Admission to UK events;
- Services connected with UK property;
- Certain transport services; and
- Work physically performed in the UK.
The precise treatment depends on the type of service and customer.
Digital Services
Digital services supplied directly to UK consumers are generally subject to UK VAT.
Examples may include:
- Software downloads;
- Mobile applications;
- Online subscriptions;
- Automated online courses;
- Streaming services; and
- Digital content.
An overseas business making these supplies directly will normally need UK VAT registration.
Where the digital service is supplied through a platform that is treated as the supplier, the platform may be responsible for accounting for VAT instead.
Great Britain and Northern Ireland
Overseas sellers should distinguish between:
- Great Britain: England, Scotland and Wales; and
- Northern Ireland.
Northern Ireland remains subject to separate rules for certain movements and sales of goods involving EU member states. Services generally follow the wider UK place-of-supply rules.
A business selling goods into both Great Britain and Northern Ireland should review each supply chain separately.
Obligations After VAT Registration
Once registered, the overseas business must generally:
- Charge VAT at the correct rate;
- Issue compliant VAT invoices where required;
- Maintain digital VAT records;
- Submit VAT Returns;
- Pay VAT due to HMRC;
- Reconcile sales, imports and marketplace reports;
- Retain supporting records; and
- Correct errors appropriately.
VAT-registered businesses are generally within Making Tax Digital for VAT and must use compatible software unless HMRC grants an exemption. VAT Returns are still required where there is no VAT to pay or reclaim.
VAT records generally need to be retained for at least six years.
VAT Agent and Tax Representative
An overseas business can appoint a UK VAT agent to handle registration, VAT Returns and HMRC correspondence.
The business remains legally responsible for:
- The accuracy of its VAT Returns;
- VAT charged to customers;
- Payment of VAT;
- Record keeping; and
- Providing complete information to its agent.
In certain circumstances, HMRC can require a non-established business to appoint a VAT representative or provide security. A formally appointed tax representative can have joint liability for the overseas business’s UK VAT debts.
Practical Examples
Overseas seller using a UK warehouse
A US company imports products into a British fulfilment centre and sells directly through its website.
Because the goods are in the UK when sold, the company will generally need to register and account for UK VAT, even if its UK sales are limited.
Seller using an online marketplace
A foreign company stores goods in a marketplace warehouse and sells exclusively to UK consumers through the platform.
The marketplace may account for VAT on the consumer sales. However, the seller may still register to recover import VAT and report other relevant transactions.
Foreign software provider
An overseas software company sells automated subscriptions directly to UK consumers.
The supplies are generally subject to UK VAT, requiring the provider to register unless a qualifying platform is responsible for VAT.
Foreign consultant serving UK companies
A foreign consultant supplies general advisory services to UK VAT-registered businesses.
The UK customers may account for VAT through the reverse charge, meaning the consultant may not require VAT registration if it makes no other UK taxable supplies.
Common Mistakes
- Applying the normal UK VAT threshold to an overseas business.
- Assuming that no UK company means no VAT obligation.
- Holding UK stock without registering.
- Confusing marketplace sales with direct sales.
- Reclaiming import VAT without valid import evidence.
- Treating all services as subject to the reverse charge.
- Ignoring digital consumer sales.
- Applying Great Britain rules automatically to Northern Ireland.
- Failing to reconcile marketplace statements.
- Registering from the wrong effective date.
Risks and Penalties
Failure to register correctly can result in:
- Retrospective VAT registration;
- VAT assessments on historic sales;
- Interest and penalties;
- Loss of input VAT recovery;
- Marketplace account restrictions;
- Incorrect customer pricing;
- Customs and import VAT errors; and
- Problems during audit or due diligence.
HMRC can register a non-established business retrospectively from the date its registration liability first arose.
Action Plan for Overseas Sellers
- Map where goods are located when sold.
- Identify the legal seller and importer.
- Separate direct and marketplace sales.
- Classify customers as businesses or consumers.
- Review the place of supply for services.
- Check whether the reverse charge applies.
- Consider separate Northern Ireland rules.
- Determine the correct registration date.
- Establish digital VAT records and reconciliations.
- Review import VAT recovery documentation.
Frequently Asked Questions
Does an overseas seller have a UK VAT threshold?
Generally not where it is a non-established taxable person making taxable UK supplies.
Must a foreign company form a UK subsidiary to register?
No. An overseas legal entity can register directly for UK VAT.
Does storing goods in the UK trigger registration?
Usually yes where the overseas seller owns the goods and makes direct sales while they are located in the UK.
Does an online marketplace always pay the VAT?
No. Marketplace liability applies only to specified transactions. The seller may remain responsible for other sales and VAT obligations.
Do overseas service providers need UK VAT registration?
It depends on the place of supply and whether the UK customer accounts for VAT through the reverse charge.
Are digital services sold to UK consumers subject to VAT?
Generally yes, unless a qualifying platform is responsible for accounting for VAT.
Does VAT registration create a UK permanent establishment?
Not by itself. VAT establishment and Corporation Tax permanent-establishment rules are separate.
Must a registered overseas business file nil VAT Returns?
Yes, VAT Returns are generally required for each period until the registration is cancelled, including periods with no VAT due.
Conclusion
Overseas sellers without a UK establishment are subject to stricter VAT registration rules than many UK-established businesses.
Registration may be required from the first taxable UK supply, particularly where the business holds UK stock, sells directly to UK consumers or provides UK-taxable digital or land-related services.
The correct treatment depends on:
- Where goods are located;
- How they enter the UK;
- Whether sales are direct or through a marketplace;
- Whether customers are businesses or consumers; and
- Whether the reverse charge applies.
Professional UK VAT Support
FKGB Accounting assists overseas businesses with:
- UK VAT registration;
- Historical VAT reviews;
- Online marketplace reporting;
- Import VAT reconciliation;
- VAT Returns and Making Tax Digital;
- Digital-services VAT;
- Northern Ireland transactions;
- VAT deregistration; and
- HMRC correspondence.
Book a consultation here
Email us: David.levy@fkgb.co.uk
Suggested Lead Magnets
- Overseas Seller UK VAT Checklist
- UK Marketplace VAT Decision Guide
- Import VAT Recovery Checklist
- UK VAT Registration Questionnaire
Important Notice This article provides general information and does not constitute tax, legal or customs advice. VAT treatment depends on the supply chain, contractual arrangements, customer status and movement of goods.
