Running a UK limited company from outside the UK comes with an extra layer of VAT complexity that trips up a lot of founders. The standard £90,000 threshold you hear about may not apply to you at all. Here is how the rules actually work.
Does the £90,000 threshold apply to you?
The short answer is: it depends on where your company is established, not where you live.
The £90,000 VAT registration threshold applies to UK-established businesses. If your company's central management and control happens in the UK (for example, board meetings are held there, key decisions are made from a UK office), and it has a real presence in the UK, the standard threshold applies. You register for VAT once your taxable turnover exceeds £90,000 in any rolling 12-month period, or if you expect to exceed it within the next 30 days.
But if you run your UK company entirely from abroad, with no staff, no physical office, and no genuine management activity in the UK, your company is almost certainly a Non-Established Taxable Person (NETP) in HMRC's eyes. For NETPs, the £90,000 threshold does not apply at all.
Easy to miss: a UK registered office, a serviced office address, or a virtual office does not make your company UK-established. Those are postal addresses, not business establishments. If the directors live and work abroad and decisions are made abroad, the company is likely an NETP regardless of where it was incorporated.
What is a Non-Established Taxable Person?
HMRC defines a Non-Established Taxable Person as a business (or individual) that makes taxable supplies in the UK but has no business establishment or fixed establishment here.
A business establishment is a place where essential management decisions are made and central administration is carried out. A fixed establishment is a place with sufficient staff and technical resources to make or receive supplies on a permanent basis.
Neither of those describes a company run entirely from overseas by a director who uses a UK registered office for post. The threshold that determines whether you have a UK establishment is qualitative, not simply about having a UK address or bank account.
Established vs. not established: a quick comparison
| Situation | Likely status | VAT threshold |
|---|---|---|
| Director lives in the UK, manages company from the UK | UK-established | £90,000 turnover threshold applies |
| Director lives abroad, UK company has a real UK office with staff | UK-established (fixed establishment) | £90,000 turnover threshold applies |
| Director lives abroad, UK company uses a virtual/registered office, no UK staff, management from abroad | NETP | No threshold: register when making UK taxable supplies |
| Overseas company selling goods or digital services to UK customers | NETP | No threshold: register when making UK taxable supplies |
When you must register for VAT
If you are a UK-established business
Register when your taxable turnover in any rolling 12-month period exceeds £90,000, or when you reasonably expect it to exceed £90,000 in the next 30 days alone. You have 30 days from the point the threshold is crossed to notify HMRC.
If you are an NETP
There is no turnover threshold. You must register for UK VAT as soon as you make your first taxable supply in the UK. In practice, this means many non-resident directors should register before they make their first sale, not after.
What counts as a taxable supply in the UK depends on the type of goods or services involved:
- Physical goods held or dispatched from the UK: generally subject to UK VAT from the first sale. If you store inventory in a UK warehouse or fulfilment centre, you almost certainly need to register immediately.
- Digital services sold to UK consumers (B2C): subject to UK VAT regardless of where you are based. This includes software, downloads, streaming, and similar services.
- Services sold to UK businesses (B2B): the reverse charge usually applies, meaning your UK business customer accounts for VAT, not you. These supplies may not require you to register, depending on your circumstances.
- Low-value goods (£135 or under) shipped directly to UK consumers: UK VAT must be charged at point of sale and you need to register to do so.
B2B reverse charge: if you only supply services to UK VAT-registered businesses, and the reverse charge applies to all of those supplies, you may not need to register at all. The obligation shifts to your customer. If any of your customers are consumers (not VAT-registered businesses), the picture changes.
Voluntary VAT registration: when it makes sense
Even if you are not yet required to register, voluntary VAT registration can be worthwhile in several situations.
- You are buying goods or services with UK VAT on them. Once registered, you can reclaim that input VAT on your returns. If you are spending on UK suppliers before you have significant revenue, this can recover real money.
- Your customers are UK businesses. Being VAT-registered signals that your company is active and compliant. For B2B sales, VAT-registered customers reclaim the VAT you charge, so it does not cost them anything.
- You plan to grow. Registering early avoids a rushed process later, and gives you a clean VAT record from the start.
Voluntary registration is available even for NETPs, but you must intend to make taxable UK supplies. HMRC will ask for evidence of trading activity or clear plans to trade.
How to register: documents and timeline
UK VAT registration is handled online through HMRC's Government Gateway. The process involves answering a questionnaire about your business, its structure, and the supplies you make or intend to make.
Documents you will need
- Certificate of incorporation for your UK company
- Company's UTR (Unique Taxpayer Reference) from HMRC
- Director's passport or national ID card
- Proof of the director's address (utility bill or bank statement, usually within 3 months)
- Business bank account details
- Evidence of trading activity or a clear business plan if you are registering voluntarily
Documents from abroad: if your ID or address documents are not in English, HMRC may ask for a certified translation. Allow extra time for this. For some countries, documents may need to be notarised or apostilled before they are accepted.
How long it takes
HMRC typically processes VAT applications within 4 to 8 weeks for overseas applicants. Applications can take longer if HMRC has questions about the company's establishment status or needs additional documentation.
Once approved, HMRC issues a VAT registration certificate with your VAT number and your effective date of registration. You can begin charging VAT from that effective date, and you can reclaim input VAT on purchases made after that date (and in some cases, before it).
Important: do not wait until you have your VAT number to start your registration. The effective date of registration is set when you should have registered, not when you actually apply. If you register late, you may owe VAT on sales made before your number arrived, which can create a painful retroactive liability.
After registration: ongoing obligations
Once you are VAT-registered, your main ongoing obligations are:
- Filing VAT returns: usually quarterly, due one month and seven days after the end of each VAT period. Returns must be filed through Making Tax Digital (MTD)-compatible software. Spreadsheets alone no longer qualify.
- Charging the right VAT: standard rate is 20%, reduced rate is 5%, and some supplies (exports, certain food, books) are zero-rated. Applying the wrong rate is one of the most common errors.
- Issuing VAT invoices: every sale to a VAT-registered customer requires a valid VAT invoice. These have specific required fields including your VAT number, the date, the tax point, and a breakdown of net and VAT amounts.
- Keeping digital records: MTD requires that you keep records digitally and submit returns through compliant software. Paper records alone are not acceptable.
- Paying on time: VAT payments are due at the same time as returns. Late payment triggers penalties under HMRC's new penalty regime, which runs on a points system.
Common questions
I am the sole director of a UK company and I live in Estonia. Does the £90,000 threshold apply to me?
Almost certainly not, unless you have staff or a genuine physical office in the UK where business decisions are made. A company run entirely by a director living abroad, using a UK registered office address, is very likely an NETP. If you are making taxable supplies in the UK, you should register for VAT regardless of your turnover.
I only sell to UK businesses, and they are all VAT-registered. Do I still need to register?
If the reverse charge applies to all of your B2B supplies, your UK customers account for the VAT themselves. In that situation, you may not be required to register. However, the rules vary by type of supply, and there are exceptions. It is worth confirming this with an accountant before assuming you are off the hook.
Can I reclaim VAT I paid before I registered?
Yes, in many cases. You can reclaim VAT on goods purchased within the 4 years before registration (if you still hold those goods) and on services purchased within 6 months before registration, provided those purchases relate to your current taxable business activities.
Do I need a UK bank account to register for VAT?
HMRC asks for UK bank account details on the registration form. In practice, some non-resident directors use accounts with Wise or Revolut Business (which provide UK account numbers and sort codes) to satisfy this requirement. This is worth checking with your accountant, as HMRC's guidance on this has not always been consistent.
What is the penalty for registering late?
HMRC charges a penalty based on the VAT that was due during the period you should have been registered. The penalty rate ranges from 5% to 15% of the net VAT owed, depending on how late the registration is. In addition, you owe the VAT itself on all supplies made since you should have registered, which can be a significant sum if trading has been going on for months.
Our UK accountants can confirm your VAT status, handle the registration, and keep your returns on time every quarter. No guesswork, no missed deadlines.
