How an Australian business that never knew it had to register for UK VAT got every outstanding return filed and persuaded HMRC to cancel the late payment penalties on its 19 month backdated period.
The situation
“The client” is an Australian business that sells online to customers around the world. In September 2023 it started taking orders from UK customers through its online store. UK sales were a small part of a much larger global business, and nobody stopped to ask whether they created a UK VAT obligation.
They did, from the very first sale. A business with no establishment in the UK is a non-established taxable person for VAT purposes, and for those businesses the UK registration threshold is nil. There is no £90,000 cushion. The business assumed VAT only mattered once UK sales reached a meaningful level, and that the VAT figure its e-commerce platform showed at checkout meant the platform was dealing with HMRC. It was not. The platform calculated a number, but it did not register, file or pay anything on the seller’s behalf.
The worry
By the time the business came to us, it had a backdated registration period running from September 2023 to March 2025, three further quarterly returns outstanding, and late payment penalties arriving on top.
It also had no way of reaching HMRC. Authority to act on its VAT account still sat with a previous agent, so HMRC would not discuss the account with the business directly, however many times it called. The penalties kept arriving, but the business could not see the account behind them.
What we did
We took over the VAT account, brought every outstanding period up to date and then dealt with the penalties one period at a time.
Took over the account. Once authority was transferred to us, we had full access to the VAT account and could deal with HMRC directly on the business’s behalf.
Rebuilt every return from the sales data. We reviewed the UK sales for each period, converted the figures from Australian dollars into sterling, and confirmed the correct VAT treatment of the shipping charges included in customer orders. We worked through all of the outstanding periods together so the same approach applied to every quarter.
Appealed each penalty on its own facts. Only once each return was final could we see what penalty properly applied. We then asked HMRC to review the late payment penalties period by period, setting out the reasonable excuse for the original failure and why the appeal could not be made within HMRC’s 30 day window.
The outcome
All four outstanding periods are now filed, and since July 2025 the business has charged UK VAT on every UK sale. HMRC reviewed the late payment penalties and canceled both of those charged on the backdated registration period in full. It accepted, as a one off, that an overseas business newly registered for VAT and dealing with problems with its former agent had good reason for the delay. It kept the penalties on two later quarters in place.
Every penalty on the backdated period canceled.
The business is now registered, up to date and filing quarterly through us, and it can see its own VAT account for the first time since it started selling into the UK.
Why it worked
Two things made the difference, and both came down to doing the work in the right order:
The returns came before the appeals. It is tempting to appeal a penalty the day it lands. Until each return was finalized, though, we could not tell whether the penalty itself was right, and an appeal built on the wrong figures does more harm than good.
Each period had its own story. In the backdated period the business did not know the nil threshold applied, and HMRC accepted that. The later quarters were different. HMRC’s view was that once the old agent relationship ended in September 2025, waiting two to four months to get returns and payments back on track was too long. Treating each period separately meant the strongest case went where the facts supported it.
What this means if you sell into the UK from overseas
If you have no business establishment in the UK and you sell to UK customers, you are likely to need UK VAT registration from your first sale, whatever your sales figures look like. Your e-commerce platform showing VAT at checkout does not mean anyone is paying it to HMRC. The sooner you deal with it, the fewer periods and penalties there are to put right. If you change agent, act within weeks rather than months, because HMRC expects the business itself to keep returns and payments on time while the handover happens.
We’ll look at your sales, work out where you stand and handle the registration, the backlog and any penalties from start to finish.
Talk to our team about UK VAT for overseas sellers
Book a confidential, no-obligation consultation and we’ll scope your situation before anything else. [LINK: Sterling & Wells VAT for non-established businesses page]
Every case turns on its own facts. This is one client’s experience, not a prediction of yours. Your sales, your registration position and your circumstances will be different, and a successful penalty appeal is never guaranteed. Nothing here is tax advice. Speak to us for advice on your own position.
Sterling & Wells Limited. [Insert regulatory statement.] Client details anonymized.
Every case turns on its own facts. This is one client’s experience, not a prediction of yours. Your sales, your registration position and your circumstances will be different, and a successful penalty appeal is never guaranteed. Nothing here is tax advice. Speak to us for advice on your own position.
Sterling & Wells Limited. Expert UK Tax Advisors & Accountants. Client details anonymised.
