VAT is charged on the supply of most goods and services made by businesses in the UK, and is collected at each stage of the supply chain.VAT registration is compulsory for businesses established in the UK making annual taxable supplies in excess of the registration threshold. VAT registration is required if a business’ VAT taxable turnover is more than £85,000. Voluntarily registration on turnover lower than that is also allowed.
There’s no VAT registration threshold for businesses making taxable supplies in the UK that have no UK business address. These businesses must register for VAT immediately on making taxable supplies in the UK, unless the reverse charge simplification applies.
The UK reverse charge simplification applies to most services when provided by a non-UK supplier to a UK VAT-registered business customer. The standard rate of VAT in the UK is 20%.
Some supplies, such as the grant of certain interests in land, insurance, education, financial services, and health and welfare, are exempt from VAT.
VAT-registered businesses with an annual taxable turnover not exceeding £150,000 can elect to simplify their VAT accounting by using the “flat rate” scheme.
Under the scheme, businesses account for VAT at a flat rate on turnover rather than on every single transaction. But they can’t recover VAT on expenditure other than for capital items over £2,000.