If you are buying goods or services from the European Union and moving to the UK, you may want to avoid VAT at all costs. This is not surprising – after all, no one likes to overpay! The good news is that in this situation you have a lot of flexibility when it comes to VAT on goods purchased in the UK. Thanks to this article, you can find out if you can avoid this charge.
VAT – is it necessary?
You can sell services to a company registered in the United Kingdom without charging VAT.
As a reminder, there are 3 rates of VAT in the UK: 20%, 5% and 0%.
The condition is that the UK company can prove that the service was used for business purposes.
You can read more about this in Notice 741A, section 2.7.
A company registered in the UK can provide the following evidence:
- certificates from fiscal authorities;
- business letterheads;
- other commercial documents indicating the nature of the customer’s business.
If the Polish tax authority accepts the evidence from the British company as sufficient, the Polish entrepreneur should issue the invoice without VAT.
Do not exceed the GBP 85,000 threshold!
The company receiving the invoice/service should also monitor the amount of such purchases as they count towards turnover and liabilities. This is particularly important when calculating total turnover to check whether the company should already be registered for VAT.
In 2023, the VAT exemption threshold is 85,000 GBP.
It should be noted that how these transactions should be settled/declared depends on the internal regulations of the country concerned.
The VAT settlement rule in England
In the UK, once the threshold is exceeded, the company must register for VAT and all subsequent transactions must be declared in this way.
Conversely, if the company is below the VAT threshold, it does not have to declare the purchase of services from the EU company in any way.
All you need to do is include it in your turnover and monitor when the threshold is exceeded.
It turns out that VAT is not necessarily mandatory when you want to buy goods in the European Union. By following a few simple rules, you can avoid it and save up to 20%.
