COUNTRY GUIDES / United Kingdom

United Kingdom tax guide for businesses

VAT Rate
20%
E-Invoicing
B2G Mandatory
Real-Time Reporting
No
Digital Service Tax
No
Products supported
Lookup
Tax ID validation
Tax
Tax amount calculation
Invoicing
Compliant invoice generator
Reporting
Real-time transaction reporting

Compliance And Rates

VAT Number Format In United Kingdom

In the UK, the VAT number includes 9 digits and the prefix GB (block of 3, a block of 4, a block of 2 – e.g., GB999 9999 52).

VAT Rates In United Kingdom

The standard VAT rate in the UK is 20%, with a reduced rate of 5% on certain goods and services. Some things are exempt from VAT, such as postage stamps, financial and property transactions.

  • 20% (Standard) – Applies to all taxable supplies, with certain exceptions
  • 5% (Reduced) – Some goods and services, e.g., children’s car seats and home energy
  • 0% (Zero) – Zero-rated goods and services, e.g., most food and children’s clothes

VAT Payments And Returns In United Kingdom

All businesses with a UK VAT number must submit periodic VAT reports and payments.


VAT Returns Frequency In United Kingdom

For all companies that operate in the UK, VAT returns must be submitted on a monthly, quarterly, or annual basis, depending on the accounting period chosen by the business entity.

  • Monthly – 1 calendar month and 7 days after the reported month ends
  • Quarterly – 1 calendar month and 7 days after the reported quarter ends


For 1 or 3 months, an entity must submit the returns and pay the tax within 1 calendar month and 7 days after the accounting period ends.


Penalties in case of late filings or misdeclarations

According to the governmental website, HMRC (Her Majesty’s Revenue and Customs) can charge penalties for VAT non-compliance of up to:

  • 100% of any tax under-stated or over-claimed if the company sends a return that contains a careless or deliberate inaccuracy
  • 30% of an assessment if HMRC sends to business entity one that’s too low and the business entity doesn’t tell them it’s wrong within 30 days
  • £400 if the company submits a paper VAT Return unless HMRC has told them that they are exempt from submitting the return online


Penalties for late payment of VAT are as follows:

  • Up to 15 days late: no penalty
  • Late payment between 15 and 30 days: 50% of HMRC interest rate charge
  • Late payment after 30 days: 100% of HMRC interest rate charge, plus a daily interest charge

Invoice Requirements

Full VAT invoices issued in the UK must contain the following:

  • a unique, sequential number of the invoice
  • supplier data (company name, address, VAT number)
  • date of invoice issuance
  • customer data (address, VAT number, and other data if available)
  • full description of goods and services provided (quantity and type)
  • net price per unit (excl. VAT)
  • total amount (excl. VAT)
  • any discounts if applicable
  • rate and amount of VAT applicable to the category of goods and services provided. If an item is exempt or zero-rated, it must be clearly visible that there is no VAT calculated.
  • The total amount of VAT
  • the invoice total (incl. VAT)

E-Invoicing

The Ministry of Defence and HMRC (Her Majesty’s Revenue and Customs) use eInvoicing extensively.

  • England – Some local authorities have individually implemented electronic invoicing solutions as part of their procurement activities. In January 2016, NHS (National Health Service) introduced mandatory electronic invoicing for the entire NHS.
  • Scotland – The Scottish Government is providing a national electronic invoicing solution through PECOS P2P, and any Scottish public sector organization can implement the solution regardless of the P2P or finance system in use.
  • Wales – currently working on the model of electronic invoicing.


In general, electronic invoicing is permitted but not mandatory at this moment.

Making Tax Digital (MTD)

MTD is a compulsory system of online tax filing.


How to file the VAT return under MTD?

  • Visit HRMC’s MTD page for VAT sign up
  • Connect your HRMC account to your MTD compatible software
  • Authorize your software to file VAT returns on your behalf, and you’re done.


Who is affected by this obligation?

According to governmental web pages, VAT-registered businesses with a taxable turnover above the VAT threshold (£85,000) must follow the Making Tax Digital rules by keeping digital records and using software to submit their VAT returns.

Easier way to automate taxes

Schedule a demo to test our products, or just create an account and start automating taxes. You can also contact us to discuss any specifics around your business.