If you’re selling digital services and products to customers in Great Britain, then you might be liable for UK’s Value-added Tax (VAT). This guide covers very important parts of the system:
- How to use Government Gateway to register for VAT in the UK
- How to file a VAT return in the UK
- How to pay VAT in the UK
- What the UK VAT rate is
We’ve scoured the HM Revenue & Customs (HMRC) website to provide you with all the necessary information about VAT for international businesses in one place.
How to register for VAT in the UK
If you’re selling digital products or services to British customers, you need to register for UK VAT and adhere to the country’s Making Tax Digital guidelines, such as using a government approved accounting software.
The good thing is you can register online, and it’s not necessary to get an agent or representative to do it for you.
First you need to create a Government Gateway account. This online portal is where you’ll file VAT returns, too.
- First, go to the VAT registration page, and under the header, "Register for VAT" click on the hyperlinked text "You can usually register for VAT online".
- Then go to the Sign In page to start the registration process, and click “create sign in details”.
- Enter your email address. Government Gateway will send you an email with a 6-digit confirmation code. Check your email and then enter this code back on the gov.uk page. Your email is confirmed! Continue on.
- Enter full name and create a password.
- Receive a 12-digit Government Gateway user ID! A copy will also be sent to your email.
Once this account is created, the VAT registration process will begin.
Right up front, the system will check if you can register for VAT online by asking you a series of questions about your business and sales activity in the UK. It might tell you to register by a different means, linking you to another business registration page from HMRC.
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As long as you’re still logged into your Government Gateway account, you can access the business registration tax page. The first step is to select ‘VAT’.
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Choose the type of business that best describes yours. HMRC will ask about why you’re registering for VAT. The most likely reason for you is that you’re “making or intending to make taxable supplies.”
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Next you’ll see a short list of the information you’ll need in order to complete the rest of the registration form. You have 15 minutes to gather all of this before proceeding, otherwise the system times out and you’ll need to start over. To help you out, here’s the list ahead of time:
- Full name and date of birth.
- A unique tax identifier from your country of origin.
- Your contact details and those of the businessBank account of the business.
- Estimated value of the taxable turnover for the next 12 months.
- Details of all associated businesses within the last 2 year.
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From there, you’ll see a registration summary. Go section by section and enter all of the correct information. HMRC provides help and guidance along the way. Just look for help links or the small question mark icons.
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Once you submit everything, HMRC will take at least a week to verify the information. When it’s all verified successfully, you should receive confirmation in your online account. You can access customer communications from the 'Your HMRC services' page.
Hopefully within 30 days (though it can take longer), you’ll be sent a VAT registration certificate, which will arrive in your online account. This certificate confirms:
- Your UK VAT number *. This is a unique identifier they’ll use to identify you in the system, and which you’ll need to put on invoices, etc. The number will be 9 digits long and start with 'GB'.
- Your ‘effective date of registration’
- When to submit your first VAT return and payment
* Something tricky: You can’t start displaying or charging VAT on UK sales until you get your VAT number, but you’ll still owe that tax to HMRC. So here’s what they advise you to do while you’re waiting to receive your VAT number:
You should increase your prices to allow for this and tell your customers why. Once you’ve got your VAT number you can then reissue the invoices showing the VAT.
How to file VAT returns in the UK
Tax returns must be filed using the Great Britain Pound (GBP), also called pound sterling. That means if you’re charging British customers in your home currency, then these transactions must be converted to GBP for filing. HMRC offers advice on how to handle conversions for tax purposes.
When to file and pay
Typically, you must file a VAT return every quarter. (When you initially register for VAT, the tax agency will tell you how often your particular business must file.)
Your Government Gateway account will actually let you know when to file and pay your VAT returns! You can always log in to check. But as a rule, UK deadlines are usually the following: 1 calendar month and 7 days after the end of an accounting period.
So, the tax return for Q1, which ends on March 31, would be due by May 7.
And you might want to file and pay a few days early! You need to allow time for the payment to reach HMRC’s account. There will be a fee (a.k.a. surcharge) if your payment is late.
Note: You must still file every quarter even if you made no sales to British customers! This is typically called a “Nil declaration” and it follows the exact same process as a normal return. (Just a little less data entry 😉)
How to file
Before you get started, you should collect all the information about your taxable sales in the UK during the previous quarter. The tax website suggests having these pieces ready:
- total sales and income
- total purchases and expenses
You can file using the accounting software you've chosen that’s compatible with Making Tax Digital. You can log into your Government Gateway account here.
One you submit, you should receive a reference number as confirmation that the return has been filed. Keep this reference number in your records!
If you need any help in the filing process, HMRC encourages you to contact them for help.
How to pay
Your tax payments must be in pound sterling as well! Make sure to take the conversion into account.
Specific payment instructions will be provided in your Gateway account after you file. There are many payment options to choose from, including by credit or debit card, online bank transfer, or direct debit.
Important: Make sure you provide your 9-digit VAT registration in the reference field every time you make a payment. This guarantees your money goes to the right account and is credited to your business!
What to do in between registering and filing?
Well, you must comply with all the rules for UK VAT! That means charging 20% VAT on all B2C sales in the country, among other things.
For further reading that will help you stay compliant and successful as a remote seller, check out our United Kingdom VAT Guide for Businesses.
Note: At Quaderno we love providing helpful information and best practices about taxes, but we are not certified tax advisors. For further help, or if you are ever in doubt, please consult a professional tax advisor or the tax authorities.