VAT Registration in the United Kingdom: NETP Rules and HMRC Requirements
Many non-resident companies mistakenly believe that VAT registration in the United Kingdom depends solely on turnover volume. In fact, for a Non-Established Taxable Person (NETP), HMRC’s logic is different: the key factor is not revenue, but the very fact of conducting taxable transactions in the UK.
A NETP is a company without an established presence in the United Kingdom, which nevertheless conducts or plans to conduct taxable operations (taxable sales) on its territory. In such cases, the obligation to register for VAT arises from the very first transaction or even from the moment it is planned, rather than after reaching the £90,000 threshold.
What HMRC Says About NETP and When the Obligation to Register for VAT Arises
According to HMRC VAT Notice 700/1, a Non-established taxable person is a person without a UK establishment, meaning without a place where management decisions are made or where there is a permanent physical presence with the resources to make taxable supplies.
For the purposes of VAT registration, Schedule 1A of the VAT Act 1994 establishes three key conditions that must be met simultaneously:
- the person makes taxable supplies in the United Kingdom or has reasonable grounds for believing that they will make taxable supplies within the next 30 days;
- those supplies (or any of them) are or will be made in the course or furtherance of a business carried on by the person;
- the person has no establishment or fixed establishment in the United Kingdom.
Unlike UK companies, which benefit from a VAT registration threshold of £90,000, for most NETPs, the obligation to register arises virtually from the first taxable transaction.
For understanding:
In accordance with Section 4(2) of the VAT Act 1994, a taxable transaction is a supply of goods or services made in the United Kingdom, excluding supplies that are expressly exempt from tax. In other words, if a supply is not exempt, it potentially falls within the VAT system.
Who Can Be Exempted from VAT Registration in the United Kingdom
The legislation provides for specific cases where even a company that formally falls under the registration requirement may be exempted by a decision of HMRC (Commissioners).
Exemption is only possible if the company proves that all its taxable operations are zero-rated supplies (for example, the sale of books, newspapers, certain educational materials, specific food products, etc.) or would be so if the company were already registered for VAT.
If a company has already received an exemption but the nature of the business changes, it is obliged to notify HMRC of this within 30 days.
In such a case, the exemption may be cancelled, and the company will be required to become VAT-registered from the date of the change in activity or from the date of HMRC’s decision.
The key conditions are as follows:
all current or future sales of the company fall under the zero rate of VAT (zero-rated supplies);
or they would be zero-rated even if the company held the status of a VAT-registered person;
the exemption is granted only upon request to HMRC; it does not apply automatically;
HMRC holds discretionary power (it may approve or refuse).
What Happens If an NETP Fails to Register for VAT
Most often, the consequences do not look like a “penalty for a technicality,” but rather like a full-scale tax assessment.
Case Study:
A potential client with an e-commerce business who had been selling goods in the United Kingdom for several years approached us. The company had no UK establishment and did not consider itself an NETP. During an audit, HMRC established that the activity fell under taxable supplies in the UK, and therefore, VAT registration should have been completed much earlier.
Result:
back-tax assessment of VAT for previous periods;
penalties;
the total amount exceeded £80,000.
For the British tax authority, ignorance of the NETP rules is not an excuse. To avoid losing tens of thousands of pounds in penalties, act proactively.
If you have any doubts regarding the tax status of your company in the UK or the need for VAT registration, leave it to us. Locman lawyers will conduct a preliminary analysis, determine your obligations, and help you safely pass HMRC compliance.
Yes. HMRC allows non-established companies to register for VAT without forming a UK Ltd, provided they carry out taxable activities in the UK.
On average, VAT registration takes between 4 and 12 weeks depending on the complexity of the structure and the number of HMRC queries.
No. The £90,000 VAT threshold does not apply to NETP, and the obligation may arise from the first taxable supply.
Typically required documents include a company registry extract, UBO passport, proof of address, and evidence of UK activity (contracts, invoices, logistics data or seller account information).
Yes. Submission to HMRC is fully online via the digital portal. No physical presence of directors or beneficiaries in the UK is required.