UK VAT rates and VAT compliance
The UK left the European Union on 31 January 2020. As part of its Brexit Withdrawal Agreement, it will remain inside the EU VAT regime until 31 December 2020. During this time, there will be no changes to UK VAT rules, treatment of transactions or filings. Read Avalara’s free 2020 Brexit guide for details on Brexit VAT and customs issues.
UK VAT rates
Whilst the UK is obliged to follow the VAT compliance rules of the European Union, it has more freedom to set its own rates, including the standard (upper) VAT rate. The only proviso is that it is above 15%. Suppliers of goods or services VAT registered in UK must charge the appropriate VAT rate, and collect the tax for onward payment to the UK tax authorities through a VAT filing: see UK VAT returns briefing.
The current rates are:
United Kingdom Covid-19 VAT rate changes
United Kingdom has brought forward tax cuts and considers temporary UK VAT rate cut to help support businesses and consumers during the Coronavirus pandemic crisis.
|Supply||Old rate||New rate||Implementation date||End date|
|E-books and online journals||20%||0%||01 May 2020||-|
|Hospitality and tourism including restaurants; cafes; pubs (ex alcohol); hospitality; hotels; B&B's; home rental; caravan and tent sites; hot take away food; theatres; circuses; amusement parks; concerts; museums; zoos; cinemas; and exhibitions. Note: served alcoholic drinks will not benefit from the cut.||20%||5%||15 Jul 2020||31 Mar 2021|
|Rate||Type||Which goods or services|
|20%||Standard||All other taxable goods and services|
|5%||Reduced||Children’s car seats; certain social housing; some social services; electricity, natural gas and district heating supplies (for domestic use only); some energy-saving domestic installations and goods; LPG and heating oil (for domestic use only); some renovation and repairs of private dwellings; some medical equipment for disabled persons|
|0%||Zero||Some social housing; printed books (including e-books); newspapers and periodicals; renovations to private housing (Isle of Man only); collections of domestic refuse; household water supplies (except distilled and mineral water); supplies of food and drink (some exceptions); take away food (if bought on the catering premises); cut flowers and plants for food production; prescribed pharmaceutical products; certain medical supplies for disabled persons; domestic passenger transport; children's clothing and footwear; children’s diapers; live animals destined for human consumption; seed supplies; supply of animal feed; supplies of residential caravans and houseboats; some construction work on new buildings; some supplies of new buildings; sewerage services; motor cycle and bicycle helmets; commercial ship and aircraft stores; intra-community and international passenger transport; some gold ingots, bars and coins, women’s sanitary products|
UK VAT compliance
Once a foreign enterprise has received its UK VAT number, it will be obliged to follow the VAT Act. This includes:
- Preparing invoices with the disclosure details outlined in the UK VAT Act.
- Electronic invoices with proper signature, authenticity and agreement by the recipient.
- Maintenance of accounts and records, which must be held for at least 7 years.
- Correct invoicing of customers for goods or services in accordance with the UK time of supply VAT rules.
- Processing of credit notes and other corrections.
- Use of approved foreign currency rates.
What is the tax point for UK VAT?
The tax point (time of supply) rules in the UK determine when the VAT is due. It is then payable to the tax authorities 30 days after the VAT reporting period end (monthly or quarterly).
For most goods, it is the time of delivery or passage of title. For services, it is the completion of the service.
Need help with your UK VAT compliance?
Researching UK VAT legislation is the first step to understanding your VAT compliance needs. Avalara has a range of solutions that can help your business depending on where and how you trade.
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