A UK company run from abroad has no £90,000 VAT threshold

The threshold most founders abroad assume they have

The UK VAT registration threshold is £90,000 of taxable turnover over a rolling 12 months. It is the number on the first page of every guide, and most founders who form a UK company from abroad, or sell into the UK from a company elsewhere, assume it applies to them. It usually does not.

HMRC's VAT Notice 700/1 supplement states the rule in two sentences: since 1 December 2012 the standard registration threshold has not been available to non-established taxable persons, and a non-established taxable person must register if it makes any taxable supplies in the UK. The deregistration limit, now £88,000, is not available to them either. They can deregister only when they have stopped making UK taxable supplies altogether.

The rule is old. What has changed is the number of businesses it reaches. A founder in Dubai who incorporates a UK company online, gives it a formation agent's address and sells courses, software or goods to UK customers has, in most cases, created exactly the kind of business the rule was written for. The company is British on the register. For VAT it is a business established somewhere else.

Who counts as a non-established taxable person

HMRC sets out the test in its VAT Registration Manual at VATREG37150. A non-established taxable person, or NETP, is liable to register under Schedule 1A of the Value Added Tax Act 1994 (VATA 1994) where three conditions are met.

• It makes taxable supplies in the UK, or intends to within the next 30 days.
• It makes them in the course or furtherance of a business.
• It has no establishment or fixed establishment in the UK.

The third condition decides most cases. Establishment is not defined in the legislation and comes from case law. HMRC's manual describes two ways a UK establishment exists: the place where essential management decisions are made and the business's central administration is carried out is in the UK, or the business has a permanent physical presence in the UK with the human and technical resources to make or receive supplies.

HMRC then lists what is not enough on its own.

• A UK-incorporated company. Incorporation alone does not constitute a UK establishment. HMRC directs its officers to look at where the management and running of the business actually take place.
• A registered, serviced or virtual office address, or a mail forwarding service.
• A UK fulfilment warehouse that exists only to send and receive goods, unless the business has its own resources or staff there.

The consequence for a corridor founder is direct. A UK company whose sole director lives in Dubai, takes every decision there, and has a registered office at a formation agent's address is, on HMRC's own description, likely to be an NETP. The same company with a UK office, UK staff and a UK-based manager running it would usually be established in the UK and would use the £90,000 threshold.

This is a separate question from corporation tax. A UK-incorporated company is UK resident for corporation tax under section 14 of the Corporation Tax Act 2009 wherever it is run, and files a CT600 every year. For VAT the same company can be treated as established abroad. The two taxes ask different questions, and a founder who answers the VAT question from the corporation tax position gets it wrong.

When an NETP does not have to register

An NETP registers only if it makes taxable supplies in the UK. HMRC's manual at VATREG37200 lists the cases where an overseas business may not need to register, because its supplies either are not made in the UK or are accounted for by someone else.

Three points sit behind the table.

The reverse charge is the reason most B2B service businesses stay out. HMRC states that a business is neither entitled nor liable to register under Schedule 1A if all its UK supplies are subject to the reverse charge. A consultancy run from Dubai that bills only UK companies usually has no UK VAT registration to make, and cannot register voluntarily on that basis either.

Consumers change the answer. HMRC's guidance on digital services to consumers states that where those supplies are liable to UK VAT, a supplier based outside the UK needs to register. Online courses of pre-recorded videos and downloads, software, e-books, subscriptions and website hosting are all within the definition. A live course taught by a person over the internet is not a digital service under those rules, although it can still be a UK supply under the general rules.

Zero-rated supplies can be exempted. Under paragraph 13 of Schedule 1A, a business that makes only zero-rated supplies in the UK can apply for exemption from registration, as HMRC explains at VATREG37250. That is the route for an overseas seller whose only UK supplies are the deemed zero-rated supplies to a marketplace.

The online marketplace rules, now and from October 2027

Since 1 January 2021, under section 5A of VATA 1994, an online marketplace accounts for UK VAT where it facilitates sales to UK consumers by overseas sellers of goods that are in the UK at the point of sale, of any value, and of goods imported in consignments of £135 or less. HMRC's manual at VATREG37210 sets out the effect on the seller: where the goods are in the UK, a liability to register still arises, but the seller can request exemption because its supply to the marketplace is deemed zero-rated.

The Budget on 28 October 2026 announced the next step. The government's policy paper on extending VAT online marketplace liability extends the rules to UK-established businesses selling goods located in the UK to consumers, where the seller is VAT registered or its sales on that marketplace exceed a threshold of £90,000 a year. The government intends it to apply from October 2027, with the threshold and detail to follow in secondary legislation.

The policy paper gives the reason, and it matters to anyone selling on a marketplace through a UK company run from abroad: some overseas businesses misrepresent where they are established to online marketplaces in order to avoid the current rules. A UK company that declares itself UK established to a platform, because it is UK incorporated, while being run entirely from abroad, is giving the platform an answer HMRC may not accept. From October 2027 the platform will collect VAT from both categories of seller, but until then the classification decides who accounts for the tax on every sale.

What it costs when registration is late

A business that should have registered and did not owes the VAT on its taxable supplies from the date it should have been registered, whether or not it charged VAT to its customers. Where prices to consumers were set without VAT, the VAT is treated as included in what the customer paid, so the business pays it out of its margin. At the standard rate of 20%, that is one-sixth of the gross receipts.

On top of the VAT, HMRC charges a failure to notify penalty under Schedule 41 to the Finance Act 2008. HMRC's manual at VATREG37350 confirms that an NETP that registers late is subject to the normal regime. The penalty is a percentage of the potential lost revenue, the VAT that went unpaid, and HMRC's factsheet CC/FS11 sets out the ranges.

Where the place in the range falls depends on the quality of disclosure, and HMRC will not charge a penalty for a non-deliberate failure where there is a reasonable excuse. Not knowing the rule is rarely accepted as one.

A worked example. A UK company run from Dubai, with a virtual office and no UK staff, sells pre-recorded online courses from its own website to UK consumers, with £60,000 of UK sales a year at prices that included no VAT. Its owner believed it was below the £90,000 threshold. After two years HMRC writes. The VAT due on £120,000 of gross UK sales is one-sixth, £20,000. If HMRC treats the failure as non-deliberate and prompted, more than 12 months after the tax was due, the penalty falls between 20% and 30% of £20,000, so £4,000 to £6,000, with interest on top. The company cannot usually recover the VAT from customers who have already paid.

The same company that registered on its first sale would have charged VAT from day one and set its prices accordingly.

How an NETP registers

An NETP registers through HMRC's online VAT Registration Service, according to VATREG37370. It can do so itself, through an agent who registers and acts for it, or by appointing a UK VAT representative.

• A VAT representative is jointly and severally liable for the NETP's VAT, with HMRC's agreement, under section 48 of VATA 1994. Appointing one is voluntary in most cases.
• HMRC can direct an appointment. Under VATREG37400, HMRC has the power to direct an NETP whose business is not established in the EU to appoint a UK-established, fit and proper VAT representative, and since 13 October 2016 it can require security from any taxable person not established in the UK, with or without a direction.
• Digital records and returns. Since April 2022 every VAT-registered business, whatever its turnover, has had to keep digital records and file VAT returns through software compatible with Making Tax Digital. An NETP is no exception.
• Charging VAT. Once registered, the business charges UK VAT on its UK taxable supplies, issues VAT invoices to business customers and can reclaim UK VAT on its costs, within the normal rules.

An owner abroad usually meets the registration together with the company's other UK obligations. The full calendar is in the note on the two filing calendars of a UK company, and an owner in the EU will find the post-Brexit position, including customs for goods crossing the border, in the note on a UK company for an EU founder.

Where founders abroad get the VAT wrong

Relying on the £90,000 threshold. The commonest error, and the most expensive. A company with no UK establishment has no threshold.

Treating UK incorporation as UK establishment. It is the right answer for corporation tax and the wrong one for VAT. HMRC looks at where the business is run.

Assuming the platform handles everything. A marketplace accounts for VAT on marketplace sales of goods. It does not account for sales from the seller's own website, and an app store does not cover services sold directly.

Treating every customer as a business. The reverse charge needs a business customer. Courses, subscriptions and downloads sold to individuals are consumer sales, and the supplier must register.

Telling the platform the company is UK established. A declaration that does not match where the business is run is the misrepresentation the October 2027 measure is aimed at.

Registering, then forgetting the returns. Registration brings quarterly returns through Making Tax Digital software and penalties for late returns and late payment. A registration with nobody operating the software has swapped one problem for another.

What to settle before the first UK sale

1. Decide where the business is established. Write down where decisions are taken, where the staff are and what the UK address actually is. That is the answer HMRC will reach.

2. List what the company sells, and to whom. Services to businesses, services to consumers, digital services, goods in the UK, goods sent from abroad. Each line has its own VAT answer.

3. Map the channels. Own website, marketplace, app store or reseller. Marketplace and platform sales may be covered by the platform; direct sales are not.

4. Register from the first taxable supply if the company is an NETP, or within 30 days of expecting one, and price UK consumer sales to include VAT.

5. Check the marketplace declarations. The establishment the company declares to each platform should match the facts.

6. Name the person who files. Making Tax Digital software, quarterly returns and payment, alongside the company's CT600 and accounts.

7. Diary October 2027. If the company sells goods on marketplaces and is, or becomes, UK established, the marketplace will start collecting VAT on its sales.

Frequently asked questions

Can a non-UK company register for VAT in the UK?

Yes. A business with no establishment in the UK can and, if it makes taxable supplies in the UK, must register for UK VAT as a non-established taxable person under Schedule 1A of the Value Added Tax Act 1994. It registers through HMRC's online VAT Registration Service, itself or through an agent, and may appoint a UK VAT representative. HMRC can require a representative or security in some cases.

Is there a VAT threshold for non-resident businesses in the UK?

No. Since 1 December 2012 the UK registration threshold, now £90,000, has not applied to non-established taxable persons. A business with no UK establishment must register if it makes any taxable supply in the UK, or expects to within the next 30 days, whatever its turnover. The £88,000 deregistration limit does not apply either.

Does my UK company need to register for VAT if I live abroad?

It depends on where the company is established for VAT, not where it is incorporated. HMRC states that UK incorporation, a registered or virtual office and a fulfilment warehouse do not on their own create a UK establishment. A UK company run entirely from abroad can therefore be a non-established taxable person with no threshold, and must register from its first UK taxable supply.

Do I need to register for UK VAT if I only sell services to UK businesses?

Usually not. Where an overseas business supplies services to a UK business customer, the reverse charge normally applies and the UK customer accounts for the VAT. HMRC states that a business is not entitled or liable to register under Schedule 1A if all its UK supplies are subject to the reverse charge. Exceptions include services connected with UK land and UK events.

Do overseas businesses selling digital services to UK consumers need to register?

Yes, where they sell directly. Digital services supplied to UK consumers are liable to UK VAT, and a supplier based outside the UK needs to register. Where the services are sold through a platform or app store that is responsible for the VAT, the platform accounts for it instead.

Does Amazon collect UK VAT for overseas sellers?

Online marketplaces account for UK VAT on goods sold by overseas sellers to UK consumers where the goods are in the UK at the point of sale, or are imported in consignments of £135 or less. Where the goods are held in the UK, the seller still has a liability to register but can request exemption, because its supply to the marketplace is deemed zero-rated. From October 2027 the government intends to extend marketplace collection to UK-established sellers.

What is the penalty for registering for VAT late?

The business pays the VAT it should have accounted for from the date it should have registered, plus a failure to notify penalty under Schedule 41 to the Finance Act 2008. For a non-deliberate failure the penalty is up to 30% of the unpaid VAT, depending on disclosure and timing. For a deliberate failure it is up to 70%, and for a deliberate and concealed one up to 100%.

Do non-UK residents pay VAT in the UK?

Individuals pay VAT as part of the price of what they buy in the UK, whether or not they live there. A business that is not established in the UK pays and charges VAT under the non-established taxable person rules: it must register if it makes taxable supplies in the UK, with no threshold, and then charges UK VAT on those supplies and can reclaim UK VAT on its costs.

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Critical advisory. The £90,000 threshold is the most quoted number in UK VAT and, for a company run from abroad, usually the wrong one. HMRC does not ask where the company was incorporated. It asks where the business is run, and a virtual office answers that question against the founder. In my experience the founders who face a VAT bill they cannot pass on are not evasive.

They read the first page of the guidance and never reached the paragraph that excluded them. We decide the establishment question before the first sale, register the company where it must be registered, check what it has told each marketplace, and file the returns alongside the CT600 and accounts through our UK accounting service for non-residents. This article is general information about UK VAT as at 12 November 2026 and not tax advice; your business's position should be confirmed against its own facts before you act.