VAT registration and returns
When a UK subsidiary must register, when it should register anyway, and how the VAT on imports, on services from the parent and on intercompany recharges is handled. Registration is included in the set-up; the quarterly returns are in the ongoing service.
Registration, quarterly returns and import VAT
VAT is a cashflow item rather than a cost, provided it is set up correctly from the first invoice. Set up wrongly it becomes a real cost. The two that catch overseas groups are import VAT paid at the border instead of on the return, and services bought from the parent that were never accounted for.
What you get
- VAT registration, compulsory or voluntary
- EORI number for imports
- Postponed import VAT set up
- Reverse charge on parent services applied
- Quarterly returns filed digitally
- Intercompany recharges treated correctly
What we do
Registration, at the right moment
Compulsory above £90,000 of taxable turnover, and often worth doing voluntarily earlier so the VAT on set-up costs is recovered.
The establishment question
A business with no UK establishment has no threshold at all and registers from its first sale. This is a common reason for an overseas group to be registered late.
Imports set up correctly
EORI number, a customs agent, and postponed import VAT so the VAT is declared and recovered on the same return rather than paid at the border.
The reverse charge on parent services
Management fees, licences and secondments are taxed where the customer is, so the UK company accounts for the VAT itself. Nothing leaves the group, but the entry belongs on the return.
Intercompany recharges treated consistently
Set once, documented, and applied the same way every quarter.
Quarterly returns filed
Through software linked to HMRC, with what to pay and when, and repayment claims supported when HMRC checks the first one.
UK VAT is charged at 20% on most sales of goods and services in the UK. A UK subsidiary must register once its taxable sales in any rolling twelve-month period pass £90,000, or as soon as it expects to pass that figure in the next thirty days. It can register voluntarily before then, and for a subsidiary that will buy UK services, rent an office and import stock, voluntary registration from day one usually pays for itself because the VAT on those costs comes back.
Why the parent's position matters
The threshold applies to a business established in the UK. A company established abroad that sells taxable goods or services in the UK, with no UK establishment, has no threshold at all: it must register from its first UK sale. It is one of the reasons groups set up a UK subsidiary in the first place before the parent starts invoicing UK customers direct while the subsidiary is being formed.
The four situations that need setting up correctly
- Imports. Goods arriving from the parent or from suppliers abroad need an EORI number, a customs agent, and postponed import VAT accounting, which lets the subsidiary declare and reclaim the import VAT on the same return instead of paying it at the border and waiting.
- Services bought from the parent. Management services, software licences, staff seconded from head office: under the general rule these are taxed where the customer is, so the UK subsidiary accounts for the VAT itself under the reverse charge. Nothing is paid to the parent, but the entry must be on the return, and it counts towards the £90,000 threshold.
- Intercompany recharges. Costs the subsidiary passes back to the parent, or the parent passes down, are supplies for VAT purposes. Whether UK VAT is charged depends on what is being supplied and where the recipient belongs. We set the treatment once, document it, and apply it consistently.
- Sales to customers outside the UK. Most services supplied to business customers abroad are outside UK VAT. Goods exported are zero-rated with the right evidence. Sales to consumers in the EU follow the EU's own rules and may need an EU registration, which we arrange through partners there.
Returns
Returns are quarterly for most companies and must be filed through software linked to HMRC. We prepare each return from the bookkeeping, check the intercompany entries and the import statements, file it, and tell you what to pay and when. Payment is due one month and seven days after the quarter end. Refund positions, common in the first year, are claimed on the return and usually paid by HMRC within a few weeks, though HMRC checks first-time repayment claims and will ask for invoices.
What we need from you
- What the subsidiary will sell, to whom and where
- Whether goods will be imported, from where, and who will handle customs
- The intercompany arrangements: management charges, licences, secondments, recharges
- Expected UK sales for the first twelve months
Common questions
Should we register for VAT before we have any sales?
Usually yes if the subsidiary will spend on UK costs before it sells. Registration lets the VAT on rent, software, professional fees and stock be reclaimed. If the subsidiary will only sell to consumers and has few UK costs, waiting can be better. We decide it with you at set-up.
Does VAT apply to the management charge from the parent?
The UK subsidiary accounts for UK VAT on it under the reverse charge. If the subsidiary is fully taxable it reclaims the same amount on the same return, so the cash effect is nil, but the entries must be made and the charge counts towards the registration threshold.
What is an EORI number?
The reference the subsidiary needs to import or export goods. We apply for it with the VAT registration. Without it, goods sit at the port.
How long does VAT registration take?
HMRC typically issues the number within a few weeks, sometimes longer where it asks for evidence of the UK establishment. We apply with the evidence attached to avoid the follow-up.
Can the UK subsidiary join a VAT group with the parent?
Only UK-established companies can be in a UK VAT group. A subsidiary can group with other UK companies in the same ownership. The overseas parent cannot join.
Related services
Bookkeeping and annual accounts
QuotedUK bookkeeping and statutory accounts
Xero set up in the parent's currency and account codes, bank feeds, monthly close, and year-end accounts under FRS 102, FRS 101 or IFRS filed at Companies House and with the tax return.
Management accounts and group reporting
QuotedA monthly pack in the group's format, on the group's close calendar
Monthly close, the reporting pack in the group's template, budget against actual, intercompany agreed, and the year-end schedules for the group auditors.
Expense management for a UK operation
QuotedA UK expense policy, the system behind it and the VAT it recovers
A UK expenses policy that matches HMRC's rules, an app your people will use, approvals that route to the right person, and the VAT recovered on everything eligible.
Get a fixed quote
Tell us where the parent company is and what the UK operation has to do.
