VAT Registration
Introduction to VAT in the United Kingdom
VAT is the full name of VALUE ADDED TAX, which is a common post-sale value-added tax in EU countries, i.e. a tax on the profit on the sale price of goods. When goods are imported into the UK (according to EU law), the goods are subject to import duty; when the goods are sold, the merchant can refund the import VAT and then pay the corresponding sales tax according to the sales amount.
About EORI
The EORI number is an abbreviation for Economic Operator Registration and Identification. The EORI number is a mandatory registration number for individuals/enterprises with economic activities in the EU countries, especially import and export business.
With or without a VAT number, sellers must submit an EORI number to Customs in order to import goods into the UK in the name of the importer and subsequently make IMPROT VAT refunds (only for merchants with a VAT number).
The need for UK VAT registration ● Why register for UK VAT?
If you do not use your own VAT number when exporting goods, you will not be eligible for import VAT refund.
If you are found to have borrowed a VAT or invalid VAT number, your shipment may be detained for customs clearance.
If you cannot provide a valid VAT invoice to your overseas customer, the customer may cancel the transaction.
The UK tax office is checking the VAT numbers of Chinese sellers through various channels, and platforms such as Amazon and ebay are also gradually requiring sellers to submit their VAT numbers.
※ Starting from December 1, 2012, the tax exemption for overseas merchants/individuals in the UK has been abolished according to the new regulations of HM Revenue and Customs (HMRC).
Overseas merchants/individuals whose goods are located in the UK at the time of sale are required to register for a VAT number and pay post-sale tax immediately, regardless of the value of the sale.
Standard VAT (UK) in detail
● Import Duty = Customs Duty (IMPORT DUTY) and Import VAT (IMPORT VAT), which are calculated as follows:
IMPORT DUTY = value of goods declared Product Tax Rate ● Import VAT = (Declared Value + Freight + Customs) 20% (This is prepaid by the seller when using their own VAT for customs clearance, and can be used as a credit in quarterly filings)
● Sales VAT = final sales price / 6
The selling price here is worth the final price you sell to the customer, e.g. if you sell 120, then the selling VAT is 120/6, which is 20.
※ As long as you use your own VAT number to ship to the UK, the import VAT can be used as a credit in the quarterly return, so the actual VAT you pay = Sales VAT - Import VAT
Points to note for low tax returns (flat vat)
1.a year sales below 150,000 pounds customers can apply flat vat, general Chinese sellers of products is the first year (vat effective after the first year) 6.5%, the second year is 7.5%, but imported vat can not be deducted! And the final tax rate is how much need to be in the tax office to determine the tax rate can be determined.
2. The use of flat vat must be applied for in advance, and can be used only after the tax office agrees to use it, not just apply for it and use it, and it must be declared for 4 consecutive quarters (even if there is no declaration, it must be done for 4 quarters), and if you don't apply for withdrawal after 4 quarters, you have to continue to use flat vat for 4 more quarters, and so on, and every 4 quarters is a stage. If you wish to withdraw, you must do so 2 months before the end of the phase.
For example, if a guest declares in March, June, September, December, and makes an application in March 2016, and starts to do flat vat in June, he/she can withdraw from flat vat in January 2017, and if he/she doesn't withdraw from flat vat, he/she has to continue to use flat vat until 2018. If you do not withdraw, you will have to continue to use flat vat until 2018. In short, you can only withdraw from flat vat if you make the application before January every year.
3. If you feel that your sales for the year will exceed £23w, you should apply to the Inland Revenue Department to adjust your flat vat back to the standard vat at the latest within 30 days of your next return.
4. use flat vat must be 100% declare all the data of the sales platform, the United Kingdom of FLAT vat checking frequency will be very high, if you account in the absence of vat before the sales or before the underreporting, the risk will be very high, if you are investigated in addition to the need to make up for all the previous unpaid taxes, the tax office in accordance with the situation and then determine the amount of the penalty.
2017/04/01 New policy added:
Regarding the new FRS policy, 2 conditions have to be met at the same time in order to qualify for the 7.5% tax rate:
1. Value of imports (C79)(5) must be greater than or equal to 250 pounds (using your company's name VAT import declaration); 2, the import value and the proportion of quarterly sales must be greater than or equal to 2% (using your company's name VAT import declaration). For example: when the quarter to do their own VAT import value of £ 1,000, the quarter's total sales of £ 20,000, declared import value of £ 1,000 ≧ total sales of 2% (20,000)(2% = £400)
Therefore, if the VAT of the client's name meets the above conditions, the tax rate of 7.5% can be applied to the quarterly return. At different times the tax rate is adjusted upwards to 16.5% if these two conditions are met.
Effective April 1, 2012, new accounts can apply for a discount of 11 TP3T for the first year. New accounts will be able to claim a discount of 1% for the first year, i.e. a lower tax rate of 6.5%, and 7.5% thereafter.
UK VAT Calculation Cases
For example, an electronic product costs $100 and is sold on Amazon for $200. 100 pieces are imported and shipped to the UK at a total cost of $800 for the first trip. The total cost of goods (declared price) is $10,000, and you sold 90 units of this product during the quarter, how much VAT do you need to pay for the quarter?
1 Standard Tax Rate 20% Declares.
Tariff = Declared Value X Product Tax Rate = 10000 * 7 % (based on 7% cell phone case) = $700
Import VAT = (Declared Value + Freight + Customs Duty) * 20% = (10000 + 800 + 700) * 20%= $2300
Sales VAT = Final Sales / 6 = (90 * 200) / 6 = 18000 / 6 = $3000
※ Since the standard rate of import VAT can be used as a credit in the quarterly filing, it is not possible to use the standard rate of import VAT as a credit in the quarterly filing.
The real VAT you need to pay on your quarterly return is: Sales VAT - Import VAT = 3000 - 2300 = 700
The total tax paid by the seller to the IRS is the import VAT at the time of import declaration and the quarterly VAT at the time of quarterly declaration:
Pay $2300 in import tax return and $700 in quarterly return, total tax paid = $2300+700=$3000 tax
2 Low tax rate of 7.51 TP3T (6.51 TP3T for the first year's 11 TP3T offer) declared:
Low tax rate of 7.51 TP3T (6.51 TP3T for the first year's 11 TP3T offer) declared:
Require only 2% of the sales amount for import VAT declaration 18000*2%=360
Tariff = Declared Value X Product Tax Rate = 360 * 7 % (based on 7% cell phone case) = $700
Import VAT = (Declared Value + Freight + Customs) * 20% = (90 * 200)2% + 800 + 700) 20%= $372
Sales VAT = Final Sales * 6.5% = (90 * 200) * 6.5% = $1170
※ Import VAT can be used in quarterly filing due to low tax rate.
The real VAT you need to pay on your quarterly return is: Sales VAT - 0=1170-0= $1170.
The total tax paid by the seller to the IRS is the import VAT at the time of import declaration and the quarterly VAT at the time of quarterly declaration:
Pay $372 tax on import return and $1,170 on quarterly return, total tax paid = $372+$1,170=$1,542 tax
A standard rate tax return pays 3,000 more than a low rate return pays 1,542. If our seller friend has tens of thousands or hundreds of thousands of sales and chooses to file at a different rate, the difference in tax paid can be tens of thousands of pounds!
I believe we all know whether to apply for standard or low VAT rates.
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