UK VAT RegistrationOverseas businesses with branches and subsidiaries in the UK

It is a commonly held belief that overseas businesses with branches and subsidiaries in the UK are either not required to be VAT registered in the UK or not entitled to be VAT registered in the UK.

UK businesses are only required to register for VAT once the VAT registration threshold of £90,000 (since 1 April 2024) is exceeded, however, the VAT registration threshold does not apply to overseas businesses. An overseas business is required to register for VAT in the UK if it is making any taxable supplies in the UK, regardless of turnover.

UK Branches & Subsidiaries

Many overseas businesses have UK branches/subsidiaries which do not make supplies to UK customers and only provide services to their overseas parent company and/or other overseas branches/subsidiaries.

These services are outside the scope of UK VAT and there is, therefore, no requirement to register for VAT in the UK.

However, VAT legislation allows such companies with an establishment in the UK to register for UK VAT and reclaim VAT incurred on purchases and expenses.

Such businesses do not charge UK VAT but incur VAT on UK purchases and expenses on making qualifying overseas sales. By registering for VAT, these businesses will receive regular refunds from HMRC.

Business or other fixed establishment

For VAT purposes, a UK establishment can be either a business establishment or other fixed establishment.

Although there is no definition of business establishment in either UK or EU law, it has been considered by various Courts including the ECJ which concluded a business establishment to mean the place where the essential decisions concerning the general management of a company are adopted and where the functions of its central administration are carried out.

UK VAT Tribunals have consistently found that where there are no permanent premises from which a business is carried on, there is no business establishment. However, for VAT registration purposes, HMRC accept that a business without a UK business establishment may have a fixed establishment.

HMRC consider a fixed establishment to be an establishment, other than the business establishment, from which the activities of the organisation are carried out and which has the permanent presence of both the human and technical resources necessary for making or receiving the supplies of services.

However, there have been several cases at VAT Tribunal in which the Tribunal has found that the registered office of a limited company in the UK amounts to some other fixed establishment for the purposes of receiving services, even if no business activities are carried out there.

Overseas supplies

A UK branch/subsidiary of an overseas entity can register for UK VAT if it makes overseas supplies that would be taxable supplies if made in the UK and it either has a UK business establishment or is incorporated in the UK with a UK registered address and receives supplies in the UK.

How to apply for UK VAT registration

UK VAT registration is applied for online, and VAT returns are also submitted electronically via HMRC’s Making Tax Digital (MTD) portal. VAT return submission is generally quarterly but businesses that only receive repayments can opt to submit monthly VAT returns.

Depending on the accounting system used, businesses located outside the UK may not be able to submit their VAT returns digitally. Shorts can help with this by submitting VAT returns using their agent services account.

 

Every individual, company or partnership is affected by the complex rules of VAT. Whatever your VAT query, our expert team is here to help.

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