Tag Archives: international

VAT: Top 10 Tips for small businesses and start-ups

By   8 December 2025
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VAT Basics
At some point it is likely that a small business or start-up will need to consider VAT. Here are a few pointers:
  1. Should you be registered for VAT?

If your income is above £90,000 pa of taxable supplies, you have no choice. But you can voluntarily register if below this threshold. There are significant penalties for failure to register at the correct time.

  • Advantages of VAT registration: VAT recovery on expenses plus, perhaps; gravitas for a business
  • Disadvantages: administration costs plus a potential additional cost to customers if they are unable to recover VAT charged to them (eg; they are private individuals) which could affect your competitiveness

More here

  1. Even non-registered businesses can save VAT
  • Look to use non-VAT registered suppliers, or non-UK suppliers (however, this may count towards your registration turnover)
  • If you are purchasing or leasing commercial property, consider looking for non-opted property or raise the issue of your inability to recover VAT in negotiations on the rent
  • Take advantage of all zero and reduced rates of VAT reliefs available
  • Challenge suppliers if you consider that a higher rate of VAT has been charged than necessary
  1. Consider using the appropriate simplification scheme 
  • Flat Rate Scheme (1% discount in first year of registration)
  • Cash Accounting (helps avoid VAT issues on bad debts)
  • Annual Accounting (can generate real, cash flow and/or administrative savings)
  • Margin schemes for second-hand goods

Further details here and here

  1. Make sure you recover all pre-registration and/or pre-incorporation VAT

VAT incurred on goods on hand (purchased four years ago or less) and services up to six months before VAT registration is normally recoverable.

  1. Are your VAT liabilities correct?

Many businesses have complex VAT liabilities (eg; financial services, charities, food outlets, insurance brokers, cross border suppliers of goods or services, health, welfare and education service providers, and any business involved in land and property). A review of the VAT treatment may avoid assessments and penalties and may also identify VAT overcharges made which could give rise to reclaims. Additionally, these types of business are often restricted on what input tax they can reclaim. Check business/non-business apportionment and partial exemption restrictions.

More on charities here

  1. Have you incurred VAT elsewhere outside the UK?

You may be able to claim this from overseas tax authorities. Details here

  1. Do you recover VAT on road fuel or other motoring costs?

Options for VAT on fuel: keep detailed records of business use or use road fuel scale charges (based on CO2 emissions)

If you need a car; consider leasing rather than buying. 50% of VAT on lease charge is potentially recoverable, plus 100% of maintenance if split out on invoice.  VAT on the purchase of a car is usually wholly irrecoverable.

More here

  1. Remember: VAT on business entertainment is usually not recoverable but VAT on subsistence and staff entertainment is. 
  1. Pay proper attention to VAT
  • keep up to date records
  • submit VAT returns and pay VAT due on time (will avoid interest, potential penalties and hassle from the VAT man)
  • claim Bad Debt Relief (BDR) on any bad debts over six months old
  • contact HMRC as soon as possible if there are VAT payment problems or if there are difficulties submitting returns on time
  • ensure that the business is paying the right amount of tax at the right time – too little (or too late) may give rise to penalties and interest – too much is just throwing money away
  • check the VAT treatment of ALL property transactions

More here

  1. Challenge any unhelpful rulings or assessments made by HMRC

HMRC is not always right.  There is usually more than one interpretation of a position and professional help more often than not can result in a ruling being changed, or the removal or mitigation of an assessment and/or penalty.

We can assist with any aspect of VAT. You don’t need to be a tax expert; you just need to know one… We look after your VAT so you can look after your business.

VAT: New guidance on using postponed VAT accounting

By   2 December 2025
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HMRC has published (on 28 November 2025) a collection of new guidance on postponed VAT accounting (PVA).

The guidance covers what a business needs to do if it is using PVA to account for import VAT on its VAT returns.

The publication brings together all PVA guidance, giving detailed information about:

 

A VAT Did you know?

By   27 November 2025
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In Italy, coffee substitutes are subject to a reduced VAT rate of 10%. But bizarrely, regular coffee is subject to the standard VAT rate of 22%. 

VAT and the 2025 Budget

By   27 November 2025
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Budget 26 November 2025
There was not too much excitement in the budget for indirect taxes (there was no change to the registration threshold, nor any VAT rates), but there were some minor changes.
VAT Grouping
The rules relating to cross border VAT grouping will be clarified. From the Budget date of 26 November 2025′ the UK will revert to its previous position on grouping to restore the “whole establishment” principle. HMRC also published Revenue and Customs Brief 7 (2025): Revised VAT grouping rules and the Skandia judgment, confirming that HMRC now considers that an overseas establishment of a business VAT grouped in the UK should be treated as part of that VAT group, even when located in an EU member state that does not operate whole entity VAT grouping.
This means that services provided between a UK head office and its overseas branch will once again be disregarded for VAT purposes, even if the branch belongs to a VAT group in another jurisdiction. 
HMRC acknowledges that some VAT groups may have accounted for VAT in line with the previous guidance and may now be eligible to reclaim overpaid VAT through the error correction notification procedure.
This HMRC brief provides more details.  

Private hire vehicles

Suppliers of private hire vehicle and taxi services will be excluded from the scope of the Tour Operators’ Margin Scheme (TOMS) from 2 January 2026, except where these are supplied in conjunction with certain other travel services. The government also published a response to the Consultation on the VAT Treatment of Private Hire Vehicles and HMRC published Revenue and Customs Brief 8 (2025): VAT Tour Operators’ Margin Scheme — supplies by private hire vehicle or taxi operators, which explains how to account for VAT as a private hire vehicle operator, a taxi operator, or business re-selling such supplies.

E-invoicing 

The government will require all VAT invoices to be issued in a specified electronic format from April 2029. An implementation roadmap will be published at Budget 2026 further to consultation with businesses. 

VAT treatment of business donations of goods to charity

There will be a new VAT relief to be be introduced on 1 April 2026 for business donations of goods to charity for distribution to those in need or use in the delivery of their charitable services, ie; in addition to goods donated for sale. HMRC also published a response to the Consultation on the VAT treatment of business donations of goods to charity, and a policy paper, VAT relief for business donations on goods to charities. The relief will apply to goods valued up to £100 per item, with a higher £200 threshold for essential electrical items to help tackle digital poverty. Eligibility is strictly limited to registered charities, meaning community interest companies (CICs) and social enterprises are excluded unless they register as charities. This corrects an anomaly where there is no VAT liability when businesses dispose of goods to landfill, but may incur one when donating those same goods to charity. 

Motability

From 1 July 2026, vehicles leased through the Motability Scheme will be subject to 20% VAT on top-up payments for more expensive vehicles which are made in addition to the transfer of eligible welfare payments for more expensive vehicles on the scheme. The standard rate of Insurance Premium Tax will apply to scheme insurance contracts: VAT and Insurance Premium Tax: change to reliefs for qualifying motor vehicle leasing schemes – GOV.UK There will be no changes to vehicles designed for, or substantially and permanently adapted for, wheelchair or stretcher users. 

ATCS

The Government has confirmed that the ‘Advance Tax Certainty Service’ (ATCS) will launch in July 2026 and provide clearances on corporation tax, stamp taxes, VAT, PAYE and the construction industry scheme, where there is no existing statutory route to certainty.

Who can claim import VAT? The TSI Instruments case

By   5 November 2025
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Latest from the courts

In the First-tier Tribunal (FTT) case of TSI Instruments Limited the issue was whether the appellant could claim import VAT when it was not the owner of the imported goods. The amount of VAT at stake was circa £8.5 million.

Background

TSI Instruments (TSI) imported scientific equipment owned by its customers for repair. The main activity of TSI in the UK is the service, repair and calibration of TSI Group goods which had previously been sold to customers around the world.

TSI is named as the importer and paid the charges made by the shipping company for dealing with the declaration and customs clearance formalities on behalf of TSI as well as paying the import VAT which it claimed.

Contentions

HMRC refused to repay the claims on the basis that only the entity with title to the goods is able to deduct the import VAT.

The appellant argued there is no requirement in the legislation that the importer should be the owner of the goods in order for import VAT to be credited. TSI asserted that, as long as the goods are imported for the purposes of its taxable business and it bears the costs of the import, the import VAT can be credited as input tax.

Decision

The FTT ruled that TSI was not entitled to claim input VAT credit for import VAT paid on goods it did not own, and the appeal was dismissed. Via both EU and UK VAT law, the right to deduct import VAT is restricted to the actual owner of the goods or the entity which has the right to dispose of the goods as their owner (or where the cost or value of the goods is reflected in the price of specific output transactions or in the price of goods and services supplied in the course of their economic activities). Since TSI did not own the goods, and their value was not included in the repair service price, the FTT ruled against TSI.

Commentary

This position could have been avoided by planning being put in place. TSI could have used Inward Processing Relief or the owner of the goods could have been the importer.

Legislation/HMRC guidance

VIT13300 – Import VAT may only be claimed by the owner of the goods who would be entitled to reclaim the import VAT either in accordance with s24 VATA 1994 (if registered for VAT in the UK) or under part XXI of the VAT Regulations 1995 (SI 1995/2518) if they are not registered for VAT in the UK, provided they satisfy the legislative conditions. For further information see Notice 723A.

HMRC published Revenue and Customs Briefs 2 (2019) and Brief 15 (2020) which restated HMRC’s long-standing policy that it is the owner of the imported goods who is entitled to recover the import VAT under current UK legislation. These Briefs clarify, but do not change, HMRC’s policy.

Common VAT mistakes

By   2 October 2025
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VAT basics

None of us are perfect, and any business can make mistakes with VAT despite all intentions to take reasonable care. So what are the most common errors? Here’s a list of pitfalls to avoid:

Wrong rate of output tax charged

Land and property transactions

  • Misunderstanding the correct VAT treatment of a land and property transactions
  • Not recognising VAT issues
  • Issues with the Option To Tax
  • TOGC issues
  • A guide to triggerpoints here

Cross-border issues

  • Failing to meet the requirements to zero-rate exports
  • Incorrect import procedures
  • Ignoring the reverse charge

Inter-company charges

Partial exemption

Business entertainment

  • Different rules apply to the recovery of input tax on entertaining depending on the type of recipient, eg: clients, contacts, staff, partners and directors depending on the circumstances

Registration

VAT groups

  • Failing to VAT group when beneficial or failing to disband
  • Recovery of input tax
  • Timing of transactions
  • Partial exemption issues

Tax points (Time Of Supply)

  • Failing to recognise a tax point for output tax
  • Incorrect treatment of deposits
  • Incorrect treatment of forfeit deposits
  • Recovery of input tax at incorrect time

Bad Debt Relief issues

  • Failing to claim Bad Debt Relief
  • Failing to repay a claim to HMRC when payment from customer is received
  • Failing to repay input tax when a supplier is not paid (after six months)

Overseas issues

Claiming input tax without the correct documentation

  • A guide to alternative evidence here

Recovering irreclaimable input tax

  • A guide to what VAT is not claimable here

Return errors

  • A box-by-box guide here

Business promotion schemes

Composite or separate supplies

Changes to a business

  • Selling new products, acquisitions, share sales, disposals, re-structuring, and ceasing to trade can all have a VAT impact and this can be missed

Fuel and motoring costs

Special schemes

One-off transactions

  • Failing to recognise VAT issues of unusual or one-off transactions

Non-business (NB) and charitable activities

  • Failure to recognise NB activities
  • Failure to restrict input tax in connection with NB activities

Errors can lead to draconian penalties, and ignorance is not a defence.

A guide to VAT triggerpoints here .

A VAT Did you know?

By   22 September 2025
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Wigs for teddy bears are subject to Customs Duty, but the Upper Tribunal ruled that ‘realistic” hearts used for a Build-A-Bear toy are duty free. 

I have to charge myself VAT?!

By   22 September 2025
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VAT Basics

I have to charge myself VAT?  How comes?!

Well, normally, the supplier is the person who must account to the tax authorities for any VAT due on the supply. However, in certain situations, the position is reversed and it is the customer who must account for any VAT due. Don’t get caught out!

Here are just some of the situations when you have to charge yourself VAT:

Purchasing services from abroad

These will be obtained free of VAT from an overseas supplier. What is known as the ‘reverse charge’ procedure must be applied. Where the reverse charge procedure applies, the recipient of the services must act as both the supplier and the recipient of the services. On the same VAT return, the recipient must account for output tax, calculated on the full value of the supply received, and (subject to partial exemption and non-business rules) include the VAT charged as input tax. The effect of the provisions is that the reverse charge has no net cost to the recipient if he can attribute the input tax to taxable supplies and can therefore reclaim it in full. If he cannot, the effect is to put him in the same position as if had received the supply from a UK supplier rather than from one outside the UK. Thus creating a level playing field between purchasing from the UK and overseas.

Accounting for VAT and recovery of input tax.

Where the reverse charge procedure applies, the recipient of the services must act as both the supplier and the recipient of the services.  On the same VAT return, the recipient must

  • account for output tax, calculated on the full value of the supply received, in Box 1;
  • (subject to partial exemption and non-business rules) include the VAT stated in box 1 as input tax in Box 4; and;
  • include the full value of the supply in both Boxes 6 and 7.

Value of supply: The value of the deemed supply is to be taken to be the consideration in money for which the services were in fact supplied or, where the consideration did not consist or not wholly consist of money, such amount in money as is equivalent to that consideration.  The consideration payable to the overseas supplier for the services excludes UK VAT but includes any taxes levied abroad.

Time of supply: The time of supply of such services is the date the supplies are paid for or, if the consideration is not in money, the last day of the VAT period in which the services are performed.

Deregistration

Any goods on hand at deregistration with a total value of over £1,000 on which input tax has been claimed are subject to a self supply. This is a similar mechanism to a reverse charge in that the goods are deemed to be supplied to the business by the business and output tax is due. However, in these circumstances it is not possible to recover any input tax on the self supply.

Flat Rate Scheme

There is a self supply of capital items on which input tax has been claimed when a business leaves the flat rate scheme (and remains VAT registered).

Domestic Reverse Charge (DRC)

The DRC makes supplies of standard or reduced rated construction services between construction or building businesses subject to the domestic DRC, which means that the recipient of the supply will be liable to account for VAT due, instead of the supplier. Consequently, the customer in the construction industry receiving the supply of construction services will be required to pay the VAT directly to HMRC rather than paying it to the supplier. It will be able to reclaim this VAT subject to the normal VAT rules. The RC will apply throughout the supply chain up to the point where the customer receiving the supply is no longer a business that makes supplies of construction services (a so-called end user, see below). More here. 

Mobile telephones and computer chips

In order to counter missing trader intra-community fraud (‘MTIC’), supplies of mobile telephones and computer chips which are made by one VAT registered business to another and valued at £5,000 and over are subject to the reverse charge. This means that the purchaser rather than the seller is responsible for accounting for VAT due.

Road fuel and power for private use 

When business fuel is used privately, self-supply charges apply based on HMRC’s published road fuel scale charges, applied per vehicle per quarter.

Alternatively, businesses can maintain detailed mileage records for actual business use percentage calculations. 

Land and buildings…. and motor cars

There are certain circumstances where land and buildings must be treated as a self supply… but that is a whole new subject in itself… as is supplies in the motor trade.

Even if the result of a self-supply or reverse charge is VAT neutral HMRC is within its rights to assess and levy penalties and interest in cases where the charge has not been applied; which always seems unfair.  However, more often than not simple accounting entries will deal with the matter…. if the circumstances are recognised and it is remembered to actually make the entries!

VAT & Import Duty

By   26 August 2025
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HMRC has updated its Guidance on How to claim a repayment of import duty and VAT if you have overpaid

It sets out how to check time limits and how to claim for importers, agents, freight forwarders or express operators. It also explains how to use the Customs Declaration Service or form C285 as an individual.

It covers:

  • who can apply
  • when to apply
  • how to apply
  • what you need — Customs Declaration Service
  • apply online — Customs Declaration Service
  • what you will need — C285 form
  • apply online — C285 form
  • what happens after the application

VAT: Tax representatives and tax agents – what is the difference and why it is important

By   13 August 2025
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VAT Basics

A Non-Established Taxable Person (NETP) may be required to appoint a tax representative or tax agent if they make taxable supplies in the UK. The term NETP is used to describe a person who is liable to be registered for VAT under the VAT ACT 1994 Schedule 1a. A NETP must register for VAT as soon as it makes its first taxable supply in the UK, or when it expects to make taxable supplies here within the next 30 days, that is; there is no turnover limit for a NETP.

A NETP is a business which has no place of belonging in the UK. So, what is the difference between a representative and agent, and does the NETP get a choice?

Tax representative

A representative maintains the NETP’s VAT records, submits VAT returns and accounts for UK VAT on behalf of the NETP and dels with communication with HMRC. A representative is jointly and severally liable for any VAT debts incurred by the NETP.

A NETP may only appoint one person at a time to act on its behalf, although a tax representative may act for more than one NETP.

Tax agent

 An agent carries out a similar role to a representative, however, the important difference is that HMRC cannot hold an agent responsible for any of NETP’s VAT debts. HMRC reserve the right not to deal with any particular agent. In some circumstances, if HMRC deem think it necessary, it will insist that a tax representative is appointed.

As long as HMRC has not directed (see below) a NETP to appoint a tax representative, it can appoint an agent to deal UK VAT affairs. Any arrangement made will be subject to whatever contractual agreement the NETP and agent decide. In some circumstances, if HMRC think it is necessary, it may still insist that a tax representative is appointed.

Distinction

The tax representative and the tax agent both act on behalf of a NETP. However, while the tax agent operates in the name of the NETP, the tax representative operates in its own name. Consequently, a tax representative is personally committed to pay HMRC and must be accredited beforehand. Contracts between representatives/agents need to be clear on this point and fees charged for this work should reflect the difference in responsibilities. Should the NETP fail to pay VAT, penalties and interest due, HMRC will collect these directly from the tax representative, so, in effect, the tax representative represents a monetary insurance for HMRC.

Direction

HMRC can direct some NETPs to appoint a tax representative who must be:

this is via VAT Act 1994, section 48(1).

HMRC may choose to require some form of security from a NETP whether or not there has been any direction regarding the appointment of a representative.

Not appointing a tax representative or agent

If a NETP does not wish to appoint a tax representative or agent, and HMRC has not directed them to appoint a tax representative, it must meet all its obligations under UK VAT law itself. This includes, inter alia:

Post Brexit

For UK businesses making overseas supplies:

Businesses established within the EU are exempted from appointing a tax representative in other Member-States (MS) as international tax assistance is compulsory within the EU (the local tax administration can request assistance from the country of establishment to recover the money directly from the business). Since Brexit, the UK became a third country, so this rule does not apply, and MS have the choice to make the appointment of a tax representative compulsory for UK businesses. Most MS have done so, the notable exception being Germany.

New guidance for registration of a NETP here.