How does an US company apply for a VAT, and what happens next

[ToysSamurai]

Hello, everyone. I am a toys retailer in US. Recently, I begin to sell to UK through a fulfillment center in UK. I understand that I need to register for a VAT if my sales is over £70,000. While my sales is still way under the threshold, I want to be prepared for it. So, how can I apply for a VAT in UK when my company locates only in US?

Also, I am not sure what would happen next after I receive a VAT? The fulfillment center said they will begin to charge me VAT after I receive a VAT number. I also assume that my customers will have to pay for VAT also? In that case, what do I need to do to keep track of the tax activities? And, where should the taxes go after I collect them (in US, we have to pay the sales tax to the State revenue department every 3 months.)

 

[apacarada]

US company selling in UK doesn't have to register for VAT in UK. Customers/companies buying from you may have to pay VAT when products enter UK.

 

[andygambles]

You may have to register for VAT.

I can not provide the specific details however many US companies I have dealt with have an EUXXXXXXX VAT number.

Your fulfilment company will start charging you VAT most likely because the goods are used and enjoyed within the UK.

My suggestion is to contact HMRC and ask them.

 

[Ray_Stewart]

You will need to register when your sales get to £70,000. You can get the information you need to register from here http://www.hmrc.gov.uk/vat/start/register/how-to-register.htm#6 and if you scroll down the page to where it deals with businesses that do not have a UK place of business it tells you to complete http://search2.hmrc.gov.uk/kbroker/hmrc/forms/viewform.jsp?formId=988 to register as a NETP (Non Established Taxable Person.

This form basically allows you to appoint a UK agent to deal with your UK VAT affairs for you.

It may pay you to register volutarily though as you are incurring VAT on the cost of goods you are selling and fulfillment costs.

 

[ToysSamurai]

Ray,

I read that page previously, and it lead me to form VAT 1A. But this was where I got lost -- right under the link to the PDF form, I saw this:

If you sell goods into the UK from another EU state - known as 'distance selling', use VAT 1A to register for UK VAT.

I am not selling from another EU state. I am in US, but my goods are in UK. Is it still the form I should use?

This form basically allows you to appoint a UK agent to deal with your UK VAT affairs for you.

It may pay you to register volutarily though as you are incurring VAT on the cost of goods you are selling and fulfillment costs.

Where can I look for an UK agent? Are there any known keywords that I can use to look them up from Google?

Also, what do you mean by "It may pay you to register volutarily ..."? Who is "It" -- the tax agent?

MANY MANY THANKS. It's completely new to me, and I can't say enough to express my gratitude to you!

 

[apacarada]

I misunderstood, if your goods are in UK and you are selling in UK then you will need to register when you reach 70K turnover.

Agent could be an accountant who will advise you and deal with HMRC on your behalf. Registering voluntarily is when you do not wait for the turnover to reach 70K, it is allowed.

 

[Ray_Stewart]

The VAT1A form covers EU and non-EU. There are a number of variants all for one form!

You don't have to appoint an agent but it makes things simpler for you. Any good bookkeeper or accountant will be happy to help.

The It in it may pay you to register refers to your best interests! Basically saying you could be more profitable if you register voluntarily

 

[David Richards]

Hello, everyone. I am a toys retailer in US. Recently, I begin to sell to UK through a fulfillment center in UK. I understand that I need to register for a VAT if my sales is over £70,000. While my sales is still way under the threshold, I want to be prepared for it. So, how can I apply for a VAT in UK when my company locates only in US?

Also, I am not sure what would happen next after I receive a VAT? The fulfillment center said they will begin to charge me VAT after I receive a VAT number. I also assume that my customers will have to pay for VAT also? In that case, what do I need to do to keep track of the tax activities? And, where should the taxes go after I collect them (in US, we have to pay the sales tax to the State revenue department every 3 months.)

I agree with Ray. I think you will have to register for VAT as you will be 'doing business the in the UK'. It's not 'distance selling', which only applies to business in other EU countries. As you don't have a place of business in the UK, you will register as a 'non-established taxable person'.

An accountant can act as your tax agent. You might want to find an accountant based in the US who has experience of dealing with UK VAT registrations - but you'll probably find it better to find a UK-based accountant who has experience of dealing with US-based companies.

(I think 'apacarada' was referring to situations where goods are exported from the US to customers in the UK, which isn't the case here. And I think the EU VAT numbers 'andygambles' was referred to applies to US-based companies who provide services (e.g. electronic downloads) to customers in the EU - which again isn't the case here.)

VAT is similar to your sales tax,; i.e. you charge VAT on the things you sell and you need to file a VAT return with HMRC (the tax authority) every three months. But there is a difference, you will pay VAT on the things you buy in the UK - but you can recover that when you file your VAT return.

So you take the VAT-you-charge-on-the-things-you-sell LESS the VAT-you-have-paid-on-the-things-you-buy... and you pay the difference to HMRC. (This is all obviously very simplified, things can get a bit more complicated at times! But your tax agent will take care of all of this for you.)

 

[ToysSamurai]

The VAT1A form covers EU and non-EU. There are a number of variants all for one form!

Ah ha. They really need to change the description on their site 'cause every time I thought I found the information I need, I saw something saying "from other EU countries". They never states that it applies to non-EU countries also. Can I submit the VAT1A form from oversea -- more importantly, will they send the result back to me to US?

The It in it may pay you to register refers to your best interests! Basically saying you could be more profitable if you register voluntarily

Ha ha. I hope so!

Agent could be an accountant who will advise you and deal with HMRC on your behalf. Registering voluntarily is when you do not wait for the turnover to reach 70K, it is allowed.

Yea, I am well aware that I need to register if my sales go beyond 70k. I don't want to wait until then, that's why I want to find out about how VAT works -- it's very different from the US sales tax.

 

[ToysSamurai]

VAT is similar to your sales tax,; i.e. you charge VAT on the things you sell and you need to file a VAT return with HMRC (the tax authority) every three months. But there is a difference, you will pay VAT on the things you buy in the UK - but you can recover that when you file your VAT return.

So you take the VAT-you-charge-on-the-things-you-sell LESS the VAT-you-have-paid-on-the-things-you-buy... and you pay the difference to HMRC. (This is all obviously very simplified, things can get a bit more complicated at times! But your tax agent will take care of all of this for you.)

Gotcha. Too bad since I most likely won't buy from UK (at least not initially), I won't be able to keep getting any money back :-D Oh well, I was born in HK and got 9 years of free education from the UK government. I guess it's time to pay back!

 

[David Richards]

VAT is similar to your sales tax,; i.e. you charge VAT on the things you sell and you need to file a VAT return with HMRC (the tax authority) every three months. But there is a difference, you will pay VAT on the things you buy in the UK - but you can recover that when you file your VAT return.

So you take the VAT-you-charge-on-the-things-you-sell LESS the VAT-you-have-paid-on-the-things-you-buy... and you pay the difference to HMRC. (This is all obviously very simplified, things can get a bit more complicated at times! But your tax agent will take care of all of this for you.)

Gotcha. Too bad since I most likely won't buy from UK (at least not initially)

Ah well, this is where things can get complicated. If you're not buying stuff from the UK, then you're probably buying them elsewhere.

If you buy goods from another EU country it's not called an import, it's called acquisition. By giving your UK VAT number to the seller it means you won't pay that country's VAT. But you will have to account for 'acquisition tax' on your VAT return - it's basically 'notional' VAT that you pay and reclaim at the same time.

If you buy goods from outside the EU, then you'll have to pay VAT (and possibly import duty) when they are imported into the EU. Your freight handling agent usually takes care of this. You can claim back the VAT (but not the import duty) if you have the right paperwork. Again I've simplified things, but your tax agent can look after all of this for you.