If you are a VAT Registered business in an EU country and sell goods (not services) or arrange for their delivery (e.g. send them by post or by courier) to a customer based in the UK or Isle of Man who isn't registered for VAT, you are distance selling. Distance selling only involves goods, not services. And it only takes place when someone registered for VAT in an EU country sells and delivers goods to someone in the UK who isn't registered - and doesn't have to be registered - for VAT. You'll need to register for UK VAT if the value of your distance sales into the UK starting 1 January exceeds over the distance selling threshold (currently £70,000). If you distance sell any excisable goods like alcohol and tobacco into the UK then you must register for UK VAT whatever the value involved.
The world of tax as it applies to you and your small business is an incredibly significant one, and yet often more than a bit confusing. One of the areas that seems to confuse most is that of VAT (value added tax). Most business owners know that they must register their business for VAT but are a bit unclear as to the exact rules. If and/or when one should apply for VAT is a common question that many businesses would like a simple answer to. You must register for VAT if you make any relevant supplies in the UK. You must also register for VAT if you have reasonable grounds to believe that you will make relevant supplies within the next 30 days.
There is in fact more than one type of registration, which is probably what confuses people. 'Compulsory registration' is, as its name implies, the point at which the law says you have to register your business. Here in the UK, this is when the value of your business' taxable commodities and services reaches £70,000 in a year. As well as the previous twelve months, the law also states that if you are aware that you will reach this figure in the next month you are also obliged to register. You are obviously not obliged to apply for VAT if your business does not exceed this threshold, but many businesses do choose to do so; this is called 'voluntary registration' and it has both advantages and disadvantages. One of the reasons that a business may choose to voluntarily apply for VAT before they reach the UK threshold is that when a business regularly invoices other VAT Registered UK customers they are able to claim back some or all of the VAT charged on their purchases.
VAT can be a burden on some businesses as they grow, particularly those that cannot immediately pass on the additional 17.5% to customers because of their local competition. Hairdressers commonly have a problem here and have to decide as they grow whether to increase their charges or absorb VAT. In any case, there is an administrative burden that cannot be ignored. This cannot be avoided but you can have good or poor systems and get good or bad professional advice. Make sure you are well informed and deal with the VAT issue efficiently.
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