NETP VAT Registration in the UK: A Complete Guide
UK VAT rules can be particularly complex for overseas businesses, especially when those businesses have no physical presence in the UK but still sell goods or services to UK customers. In recent years, HMRC has tightened its approach to VAT compliance for foreign sellers, making it more important than ever to understand when VAT registration is required and what ongoing obligations apply.
This guide provides a complete and up-to-date overview of Non-Established Taxable Person (NETP) VAT registration in the UK. It explains who qualifies as an NETP, when VAT registration is mandatory, how the registration process works, and the compliance responsibilities that follow registration. Attention is given to one of the most misunderstood areas: VAT thresholds and why they do not apply to non-UK-established businesses.
Whether you are selling goods to UK customers, providing digital services, or operating through online marketplaces, this article is designed to help overseas businesses understand their UK VAT exposure and avoid costly mistakes. By the end of this guide, you should have a clear picture of when you need to register, how to remain compliant, and how to manage your UK VAT obligations confidently.
What is a Non-Established Taxable Person (NETP)?
A Non-Established Taxable Person (NETP) is defined under Schedule 1A of the VAT Act 1994 as any person who is not normally resident in the UK, does not have a UK establishment, and, in the case of a company, is not incorporated in the UK with the ability to make or receive supplies at its registered address.
For these purposes, HMRC considers a UK establishment to exist where:
(a) The place where essential management decisions are made, and the business’s central administration is carried out, is in the UK; or
(b) The business has a permanent physical presence with the human and technical resources to make or receive taxable supplies in the UK.
Importantly, HMRC has clarified that the following do not by themselves create a UK establishment:
- A registered, serviced or virtual office address, or a mail forwarding service;
- A company incorporated in the UK, unless it is also able to make or receive business supplies at its registered address and management functions are conducted from the UK;
- A UK fulfilment warehouse or distribution centre used solely for the purpose of sending and receiving goods.
Businesses established in the Isle of Man are not treated as NETPs and continue to benefit from the standard UK VAT registration threshold.
Common examples of NETPs include overseas companies selling goods online to UK consumers, foreign suppliers providing digital services such as software subscriptions or online training to UK users, and non-UK businesses selling through online marketplaces. In all these cases, the company remains based abroad, but its supplies are treated as UK-taxable for VAT purposes.
HMRC applies specific VAT rules to NETPs because of the higher risk of non-compliance associated with overseas sellers. As a result, NETPs are subject to stricter registration requirements and cannot rely on the VAT thresholds that apply to UK-established businesses. Understanding whether a company qualifies as an NETP is therefore a critical first step in determining its UK VAT obligations.
VAT Registration Threshold for NETPs
One of the most common areas of confusion for overseas businesses is whether any VAT registration threshold applies to Non-Established Taxable Persons. For UK-established businesses, VAT registration is only required once taxable turnover exceeds the standard threshold of £90,000. However, this threshold does not apply to NETPs.
HMRC is explicit that NETPs are not subject to a VAT registration threshold. A non-UK-established business must register for UK VAT as soon as it makes any taxable supply in the UK, even if that supply is a single transaction of minimal value. This rule has been in place since December 2012 and applies regardless of turnover, business size, or sales frequency.
This requirement applies equally to the sale of goods and the supply of services. Overseas sellers shipping goods to UK customers, providers of digital services such as apps or online subscriptions, and foreign businesses selling through online marketplaces are all required to register immediately if their supplies are subject to UK VAT. There is no exemption based on low sales volumes or early-stage trading.
It is also important to note that the EU distance-selling thresholds that previously allowed overseas sellers to defer VAT registration until a certain level of sales to UK consumers was reached no longer apply following Brexit. Since 1 January 2021, the UK has operated a £135 consignment value threshold: where goods sold directly to UK consumers are valued at £135 or less, the overseas seller (or the online marketplace facilitating the sale) must charge UK VAT at the point of sale rather than at importation. Regardless of these rules, NETPs cannot rely on any turnover-based threshold to delay VAT registration. HMRC requires registration from the first taxable supply.
NETPs whose only UK supplies are zero-rated may apply to HMRC for exemption from VAT registration. This can be done through HMRC’s online VAT registration service or by requesting the VAT1 form by post. The application must include an estimate of the value of zero-rated supplies expected over the next 12 months. If HMRC approves the exemption, the NETP will not be required to register. If rejected, HMRC will proceed with registration.
Understanding that NETPs must register from the first taxable supply is critical. Many overseas businesses incorrectly assume they can rely on UK VAT thresholds, only to discover later that they should have been registered from day one, often resulting in backdated VAT liabilities, penalties, and interest.
When Does an NETP Need to Register for VAT?
A Non-Established Taxable Person must register for UK VAT when it makes or intends to make any taxable supply in the UK, regardless of value. Specifically, the NETP must notify HMRC within 30 days of the date it first makes a taxable supply in the UK, or within 30 days of when the expectation first arose that it would make taxable supplies in the next 30 days, whichever is earlier. There is no turnover threshold; a single transaction of any value is sufficient to trigger the obligation. Unlike UK-established businesses, NETPs are not allowed to wait until a turnover threshold is reached. The obligation to register is triggered immediately, even where the value of the supply is small or the activity is expected to be short-term.
For overseas businesses selling goods to UK customers, registration is generally required from the first sale where the supply is subject to UK VAT. This includes goods shipped directly to UK consumers from abroad and goods imported into the UK for local sale. In many cases, VAT is also due at the point of import, and VAT registration is required to account for it correctly and, where applicable, recover input VAT.
NETPs supplying digital services to UK consumers must also register for the first transaction. Digital services include electronically provided services such as software, mobile applications, streaming services, online courses, and subscription-based platforms. HMRC treats these supplies as occurring where the consumer is located, so UK VAT applies when the customer is in the UK, regardless of the supplier’s location.
An important exception applies where the NETP’s only UK supplies are services to UK VAT-registered businesses. In such cases, the reverse charge mechanism under section 8 of the VAT Act 1994 requires the UK customer to account for VAT on the supply. Where all of a business’s UK supplies fall within the reverse charge, the NETP may not be required to register for UK VAT. However, if the NETP also supplies goods to non-VAT-registered UK customers, registration will still be required.
Registration may also be required where an overseas business sells through online marketplaces or platforms. While some marketplaces are treated as deemed suppliers for VAT purposes in certain scenarios, this does not eliminate VAT obligations in all cases. NETPs must carefully assess whether they remain responsible for VAT registration and reporting, based on the structure of their sales and the marketplace’s role.
In practice, this means that any overseas business intending to make VAT-taxable supplies in the UK should consider VAT registration before trading begins. Failing to register on time can result in HMRC retrospectively demanding VAT, along with interest and penalties, even if the business was unaware of the requirement.
How to Register for VAT as a NETP
Confirm Your NETP Status
Before starting the registration process, ensure your business qualifies as a Non-Established Taxable Person. This means you make VAT-taxable supplies in the UK but have no fixed establishment or permanent place of business in the country. Misidentifying your status can lead to incorrect registration and future compliance issues
Gather Required Information
Collect all necessary details for your VAT application. You will need your legal business name, the address of your principal place of business (PPOB), tax identification number from your home jurisdiction, a description of your UK-related business activities, the date of your first taxable supply in the UK, and bank account details. While a UK bank account is not mandatory, it can simplify VAT repayment processing.
The PPOB is the address where orders are received, and where the business’s day-to-day operations take place. HMRC requires this to be outside the UK and should not be a third-party address, such as a mail forwarding service or a serviced office. Your PPOB will be the address recorded on your UK VAT registration certificate.
Submit Your Application
Apply through HMRC’s online VAT registration portal for non-established businesses, or by submitting form VAT1 by post. When a VAT representative is being appointed, the supplementary form VAT1TR should also be completed and submitted with VAT1. Ensure all information is accurate and complete, as errors may delay registration or trigger further enquiries from HMRC.
Note: There is a known issue with the HMRC online VAT registration portal whereby selecting the “non-established taxable person” option results in registration as a natural person rather than a legal entity. Non-UK companies registering online may need to choose the “non-UK company” option instead to ensure correct registration. HMRC has been made aware of this issue, but it remains unresolved as of early 2025. It is advisable to verify the registration details carefully upon receipt of the VAT certificate.
Respond to HMRC Requests
After submitting the application, HMRC may request additional documentation to verify your identity, your business activities, or your NETP status. Respond promptly to any requests to avoid delays in receiving your VAT registration number.
Receive Your VAT Number
Once HMRC approves your application, you will receive a UK VAT registration number. From this point, you must include this number on all UK invoices, charge VAT where applicable, and begin complying with VAT reporting obligations.
Set Up Compliance Processes
After registration, establish systems to ensure ongoing compliance. This includes maintaining accurate records of all UK sales, charging the correct VAT rates, filing VAT returns on time, and managing payments. Many NETPs choose to begin registration before trading to ensure VAT is applied correctly from their first taxable supply.
Appointing a VAT Representative or VAT agent
NETPs may choose to appoint a UK-based VAT representative or VAT agent to manage their UK VAT affairs. The key distinction between the two is as follows:
A VAT representative acts in their own name on behalf of the NETP and is jointly and severally liable for any VAT debts incurred by the NETP. The representative is responsible for maintaining VAT records, submitting returns, and accounting for UK VAT. Only one representative may be appointed at a time. Where a representative is appointed, the NETP should complete form VAT1TR alongside the VAT1 registration form.
A VAT agent carries out similar functions but acts in the name of the NETP and is not liable for the NETP’s VAT debts. This distinction is significant and should be reflected in any contractual arrangement between the NETP and its agent.
If no representative or agent is appointed (and HMRC has not directed that one be appointed), the NETP remains personally responsible for all UK VAT obligations.
HMRC has the power to direct certain NETPs to appoint a VAT representative, particularly where there is a perceived risk to the revenue. HMRC may also require the NETP to provide financial security. NETPs should be aware of these possibilities when planning their UK VAT compliance arrangements.
VAT Compliance Obligations for NETPs
Filing VAT Returns
Once registered, NETPs must submit regular VAT returns, typically on a quarterly basis. Even if no sales are made during a period, a return is still required. Returns must include details of all taxable supplies made to UK customers and any input VAT that the business is entitled to reclaim. Filing on time is critical, as late submissions can result in penalties and interest.
Making Tax Digital (MTD) Compliance
All VAT-registered businesses, including NETPs, are required to comply with Making Tax Digital for VAT. This means maintaining digital records using HMRC-recognised MTD-compatible software and submitting VAT returns digitally through the MTD platform. Paper-based record-keeping and manual submissions are no longer permitted for VAT-registered businesses. NETPs should ensure their accounting systems or appointed agents use software that meets HMRC’s MTD requirements.
Record-Keeping
NETPs are required to maintain comprehensive records of all transactions related to their UK supplies. This includes invoices, receipts, shipping documents, and contracts. HMRC expects records to be retained for at least six years, and they must be sufficient to support the figures reported on VAT returns. Inaccurate or incomplete records can lead to enquiries and potential fines.
Charging the Correct VAT Rate
NETPs must apply the correct UK VAT rate to each supply. Standard-rated goods and services are subject to 20% VAT, but some supplies may be reduced-rated at 5% or zero-rated, depending on the type of goods or services provided. Misapplying VAT rates can trigger HMRC audits and penalties, so careful attention is required.
Import VAT & Postponed Accounting
For NETPs importing goods into the UK, VAT is generally due at the point of importation. Postponed VAT accounting allows businesses to declare and recover import VAT on the same VAT return, improving cash flow. Properly understanding and applying these rules is essential for compliance.
Compliance With Digital Services Rules
NETPs supplying digital services to UK consumers must also ensure compliance with VAT rules for electronically supplied services. VAT must be charged based on the customer’s location, and appropriate records must be maintained to demonstrate the correct treatment of each transaction.
Timely Payments
VAT collected must be remitted to HMRC by the due date specified on the VAT return. Late payments attract interest and potential penalties, so businesses should ensure they have processes in place to manage VAT cash flow effectively.
Common Mistakes Made by NETPs
Assuming UK VAT Thresholds Apply
Many overseas businesses mistakenly think they can wait until their turnover reaches the standard UK threshold of £90,000 before registering. For NETPs, there is no threshold, and registration must occur from the first taxable supply.
Late Registration
Delaying VAT registration can result in HMRC claiming backdated VAT, along with interest and penalties. Some NETPs only realise their obligations after trading has started, creating significant financial liability.
Incorrect VAT Rates
Applying the wrong VAT rate on goods or services is a common error. Standard-rated supplies are 20%, but some goods or services may be reduced-rated at 5% or zero-rated. Mistakes in VAT rates can trigger HMRC audits and penalties.
Poor Record-Keeping
NETPs are required to keep detailed records of all transactions related to UK supplies for at least six years. Failing to maintain proper invoices, receipts, and shipping documents can result in HMRC enquiries and fines.
Misunderstanding Digital Service Rules
Providers of digital services must charge VAT based on the customer’s location. NETPs sometimes fail to apply the correct rules, particularly when selling through multiple platforms or marketplaces.
Ignoring Import VAT Requirements
NETPs importing goods into the UK may neglect postponed VAT accounting or fail to account for import VAT correctly. This can lead to unexpected VAT liabilities and compliance issues.
Relying on Marketplaces to Handle VAT
While some online marketplaces act as the deemed supplier for VAT, responsibility for registration and compliance may still fall on the NETP. Failing to understand the marketplace rules can result in missed registration or reporting obligations.
Conclusion
Navigating UK VAT as a Non-Established Taxable Person can seem complex, but understanding the rules is essential for any overseas business trading with UK customers. The most critical point is that NETPs have no VAT threshold and must register from the first taxable supply, whether selling goods, providing digital services, or operating through online marketplaces. Unlike UK-established businesses, NETPs cannot delay registration on the basis of turnover. Once registered, they are responsible for charging the correct VAT rates, maintaining accurate records for at least six years, submitting timely VAT returns, and accounting for import VAT when goods enter the UK. Digital service providers and marketplace sellers must also ensure VAT is correctly applied depending on the customer’s location and the platform’s role in the supply. Failing to meet these obligations can result in backdated VAT liabilities, penalties, and interest from HMRC.
Proactively registering for VAT and implementing strong compliance processes allows NETPs to operate smoothly in the UK market. Early registration ensures VAT is applied correctly from the start and reduces the risk of enforcement action. By establishing clear systems for invoicing, record-keeping, and VAT reporting, overseas businesses can manage cash flow effectively while staying fully compliant. Ultimately, understanding NETP rules, registering promptly, and adhering to HMRC guidance enable foreign companies to confidently expand into the UK market, meet their tax obligations, and avoid unnecessary financial and administrative complications.
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