United Kingdom – Comprehensive VAT Guide (2026 Edition)

Standard Rate – 20%: This is the default rate of VAT applied to most taxable supplies of goods and services in the UK. Since 4 January 2011, the standard rate has been 20%. Unless a good or service is specified as reduced or zero-rated (or exempt), it will attract 20% VAT. Examples: clothing for adults, electronics, appliances, alcohol, restaurant meals, hotel accommodation, professional services (legal, consulting), non-essential services, etc., are standard-rated. (Some historical context: the standard rate has changed over time – it was 17.5% before 2011, temporarily 15% in 2008–2009 as a recession measure, then returned to 17.5% and raised to 20% in 2011. It has remained 20% since, and no announced changes beyond 2026.) [en.wikipedia.org] [en.wikipedia.org], [en.wikipedia.org]

Reduced Rate – 5%: The UK has a single reduced VAT rate of 5%, applied to certain specific goods and services that are deemed either essential or meriting tax relief. Examples of 5% supplies: domestic fuel and power (household electricity and gas are 5%), installation of energy-saving materials in homes (like insulation, solar panels – recently expanded to 0% from April 2022 for some installations, see below), children’s car safety seats (5%), certain residential property renovations (converting a building into a different residential use or bringing long-empty houses back into use), and mobility aids for the elderly. During the COVID-19 pandemic, the government temporarily applied a 5% reduced rate to hospitality (restaurants, hotels, attractions) from July 2020 to Sept 2021 to support that sector, but this returned to 20% thereafter (that was a temporary measure, now lapsed). Note: In 2022, a new relief made many energy-saving materials zero-rated (see “recent changes” below). But as of 2026, the core reduced rate remains 5% for the categories defined in legislation (Schedule 7A of VATA 1994 lists items eligible for 5%). [en.wikipedia.org]

Zero Rate – 0%: Zero-rated supplies are taxable for VAT but at a 0% rate. The UK zero-rates a range of socially important or sensitive items, meaning no VAT is charged to customers but suppliers can still reclaim input VAT. Key zero-rated supplies:

Implication: Businesses making zero-rated sales charge 0% but still reclaim VAT on costs, as mentioned in Scope above.

Exempt supplies: (Not a rate per se, but no VAT charged.) As detailed, these include:* financial services*, insurance, education, healthcare, lotteries and gambling, postal services by the Royal Mail, burial and cremation, and certain real estate transactions. No VAT is charged to the customer, and the supplier cannot normally recover related input VAT (partial exemption rules apply). We list these here since from the consumer perspective exempt items appear “no VAT” just like zero-rated, but the difference lies in input VAT recovery and business registration status. (See Section 2 and Section 15 for partial exemption.)

Format: A UK VAT number is traditionally nine digits long, often written as “GB123456789”. For example, the VAT number might be displayed as GB 123 4567 89. Sometimes it’s grouped as three blocks (3-3-3 digits) or 3-4-2; but any grouping is for readability. The official format is 9 digits, with the “GB” prefix used in international contexts (within the UK it’s common just to quote the digits).

Example: HMRC’s own VAT number might be GB123456789 (illustrative). If a business provides services and quotes a VAT number like 123 4567 89, that is a UK-format number.

Validation: The UK’s 9-digit VAT number incorporates a checksum in the last two digits. Valid numbers follow a specific mathematical algorithm (modulo 97 calculation). Businesses and counterparties can validate a UK VAT number using the EU’s VIES system (for NI or pre-2021 UK numbers) or HMRC’s online VAT number checker (since Brexit, UK numbers – with prefix GB – are no longer all on VIES except NI “XI” numbers, see below). A valid UK VAT number should be within certain ranges (some sequences are not used; for instance, numbers starting with 00 aren’t valid; also 3-digit sequences above 970 series are reserved for certain purposes).

GB Prefix: Before Brexit, on EU intracommunity invoices the prefix “GB” was used to denote a UK VAT number. Post-Brexit, GB is still the prefix for VAT numbers of businesses in Great Britain for cross-border invoices, though these are now treated as non-EU numbers. Northern Ireland Protocol: Northern Ireland remains in the EU VAT system for goods, and as such NI businesses engaged in EU trade have been allocated an “XI” prefix in addition to their GB number. Practically, an NI business’s VAT number might be the same digits, but when selling to the EU it uses “XI” instead of GB as the country code. For example, a NI company with GB123456789 might be known as XI123456789 for EU transactions (and still GB123456789 for services or domestic use). The “XI” code is recognized in the EU’s VIES VAT validation system for NI. Businesses in Great Britain do not use XI, only NI does. [gov.uk]

Special formats: Some VAT numbers can have additional digits:

Usage: The VAT number must appear on VAT invoices that a business issues (if the business is VAT-registered). For example, an invoice from a UK supplier to a customer will show “VAT Registration Number: 123 4567 89”. On invoices for cross-border EU sales (like an NI to EU sale) the format “XI123456789” is used to identify it as NI (and qualifies for zero-rating if customer provides their EU VAT). Post-Brexit, if a GB company sells to an EU business, it provides its GB number (though it’s technically not an “EU VAT number” anymore, the EU buyer would treat it as third-country import).

Check Digit Algorithm: (For completeness) The first 7 digits are multiplied by descending weights 8,7,…,2, the sum is mod 97 and subtracted from 97 to get the last two digits. If the result is under 10, to form two digits. Certain results are adjusted (e.g., 00 becomes 97). HMRC internal manuals confirm the calculation. This matters mostly for HMRC issuing valid numbers and for software validation. Usually, end-users can rely on official checkers.

The VAT registration threshold for UK-established businesses (based in GB or NI) is £90,000 in taxable turnover per annum as of April 2024. This means if a company or sole trader’s taxable sales (i.e., sales that would be subject to VAT at standard, reduced, or zero rate – exempt sales are not counted toward this threshold) exceed £90,000 in the last 12 months or are expected to exceed £90,000 in the next 30 days alone, registration is compulsory. [en.wikipedia.org], [en.wikipedia.org]

The UK has committed to reviewing this periodically. It is indeed “by far the highest VAT registration threshold in the world” – by contrast, many EU countries have thresholds under €50k or none at all. [en.wikipedia.org]

12-month rolling period: The threshold is calculated on a rolling basis, not by calendar year. At the end of each month, a business must look at its cumulative taxable turnover for the past 12 months. If it has exceeded £90,000, the business must notify HMRC within 30 days and register. The registration will take effect from the end of the month following the month it went over (or immediately if the next 30 days criterion applies). For example, if at end of July your past Aug–July turnover = £92k, you must notify by end of August; HMRC will register you effective 1 September.

Next 30 days rule: If at any point the business expects to make taxable sales exceeding £90k in the upcoming 30 days alone (perhaps due to a one-off big contract), it must register immediately (this is an anti-avoidance measure to catch sudden large spikes). For instance, if on 1 March you sign a deal to sell £100k of goods by 20 March, you know you’ll breach the threshold in 30 days, so you must register by 30 March, effective 1 March.

Taxable turnover definition: It includes standard, reduced, and zero-rated sales. Exempt sales are excluded from this calculation (exempt supplies don’t count toward threshold). Also excluded are any sales made while not established in the UK (for foreign biz rules see below), and sales of capital assets can be excluded if one-off (but generally they are still part of turnover calculation if they’re taxable). HMRC’s Notice 700/1 clarifies what to count.

Eligibility – Control and Establishment: VAT grouping is permitted for “bodies corporate” (companies, LLPs, etc.) and certain other entities (individuals or partnerships) that are under common control, provided all members of the group have an establishment in the UK. Historically only corporate bodies could join, but since 2019, HMRC expanded eligibility to non-corporate entities if they control (e.g. owning companies) or are controlled by corporate members. The key criteria are: [gov.uk], [gov.uk] [gov.uk]

Application and Administration: Businesses must apply to HMRC to form a VAT group (using form VAT50, and VAT51 for adding members). HMRC has discretion to refuse or impose conditions, particularly to prevent tax avoidance (for example, HMRC can refuse grouping if it sees that grouping might allow a largely exempt business to join with a taxable business just to reclaim VAT it otherwise couldn’t – HMRC’s power in Section 43 VATA can deny grouping where it would “result in an overall reduction of VAT payable”). Generally, however, if conditions are met, grouping is allowed. The group chooses a name (often the parent’s name) and a representative member.

Once approved, the group registration takes effect from a set date. All invoices between members should ideally note “VAT not charged – intra-group supply” or similar, because no VAT applies. Invoices to outside customers bear the single VAT number. If a member leaves the group or the group disbands, HMRC must be informed.

Skandia / branch issues: A specific point – in EU law, a 2014 case (Skandia) said an overseas branch can be treated separate for VAT if the head office is in a VAT group in another country, affecting cross-border services and reverse charge. The UK initially did not adopt this interpretation, but post-Brexit it has more leeway. The UK’s position (as of 2026) is that it still broadly does not follow Skandia except where HMRC specifically applied “section 43(2A)” to make certain intra-entity charges taxable if one part is in a VAT group and another is not. This is a niche affecting some financial companies. (HMRC updated policy in early 2024 about disregarding certain internal transactions unless avoidance). For most readers, not critical, but worth noting UK groups can have cross-border branch complications in specific cases. [gov.uk]

Not be registered or liable to register for VAT in the UK. Essentially, if you should have registered, you can’t circumvent that by trying a refund claim – you need to register. And if you are voluntarily registered, you would reclaim via returns, not this scheme. So this is for businesses with no UK VAT number and no requirement to have one. [gov.uk]

Have no business establishment or usual place of business in the UK. (If they have a UK fixed establishment, they should be registered as a UK business or part of a VAT group, etc., so then not use this scheme.) [gov.uk]

Make no supplies in the UK (during the claim period) other than certain zero-rated or reverse-charged supplies. The notice specifies allowed exceptions: the business can still qualify if its only UK supply was one where the customer accounted for the VAT (e.g., B2B services under reverse charge), or transport of goods related to exports, etc. But if it made any standard-rated or reduced-rated supply in the UK, it likely was required to register and thus ineligible for this refund route. [gov.uk]

Reciprocity: The UK requires that the country where the business is established offers similar VAT refund arrangements to UK businesses (reciprocal treatment). HMRC will refuse an application if the claimant’s country doesn’t reciprocate. In practice, the EU countries and many others (e.g., Norway, Canada, Japan, etc.) allow VAT refunds to UK traders, so UK allows theirs. Businesses from countries that have no VAT or don’t refund to foreigners might be denied (though if no VAT in home country, often UK still refunds – see below – reciprocity mainly hits countries like the US where sales tax might not be refunded to foreign govts; historically UK still refunded to US businesses despite US not having VAT, as US has no scheme; Notice 723A implies refusal only if that country has a turnover tax refund scheme but bars UK businesses). [gov.uk]

Reciprocity example: UK lists that it does not refund to businesses from some countries unless those countries allow UK claims. For instance, if a business is from a country with no VAT (e.g., Gulf countries before they introduced VAT), HMRC might still process it. But if from a country like China or Russia that has VAT but doesn’t refund foreigners, HMRC might reject. In practice, EU, Canada, Japan, Norway, Switzerland, etc., are fine; one needs to check HMRC’s lists.

Period: The claim can cover a period between 3 months and 1 year (can be shorter if it’s the remainder of a calendar year). Often claims are done for a calendar year (e.g. Jan–Dec 2025 expenses, claim in early 2026). It cannot cover more than 12 months, or less than 3 months unless the period is what’s left of a calendar year (e.g. a company could claim Jan–Mar or Jan–Jun, etc.). In practice, HMRC allows quarterly or annual claims.

Deadlines: Claims must be submitted by 31 December of the year following the claim period. So, expenses from 1 Jan to 31 Dec 2025 must be claimed by 31 Dec 2026. If missed, you lose the right. (Earlier if partial year: e.g., a claim for Jan–Jun 2025 also must be by 31 Dec 2026 – basically always 31 Dec of next year). This is aligned with the “13th Directive” timelines, which UK follows. [gov.uk], [gov.uk]

Minimum claim amounts: If the claim period is less than a year (but at least 3 months), the minimum claim is £130 (UK set this historically when threshold was £250 pre-2009, it lowered to align with EU’s €400). If the claim is for a full year (or the remainder of a year that’s under 3 months), the minimum is £16 (again matching EU’s €50 historically). These values ensure HMRC isn’t handling trivial claims. So a foreign business must have at least £130 of UK VAT to reclaim in a quarter, or £16 if a whole year. (These amounts are relatively small, easy to exceed with one hotel stay.) [gov.uk]

Method: Prior to Brexit, EU businesses applied via their home country’s portal (8th Directive electronic system) – not applicable now. All businesses (EU or non-EU alike) must apply directly to HMRC. The UK has an online service where you fill Form VAT65A (or now an online equivalent; the VAT652 referenced in results is for error corrections, not this – pardon). Actually for foreign refunds, the form is VAT65A plus a Certificate of Status (VAT66 from home tax authority). The claimant must provide: [gov.uk], [gov.uk]

Processing time: HMRC aims to process such claims within 6 months of receipt (the law actually gives HMRC up to 6 months to make the refund). If approved, HMRC will refund the VAT in GBP, usually via an international bank transfer to the claimant’s bank (or to an agent’s account if authorized). They pay in GBP; the claimant’s bank may convert to local currency. If HMRC rejects or partially disallows items, they will send an explanation, and the claimant can seek a review or appeal within 30 days. [gov.uk] [gov.uk], [gov.uk]

Discretionary Requirement: Under VATA 1994 Section 48, HMRC can direct a non-UK established person to appoint a VAT representative (with joint liability) if the person is not established in an EU member state. Post-Brexit, this effectively means any business established outside the UK (including now EU businesses) could be subject to such a direction. However, HMRC typically uses this power for high-risk cases (like overseas online retailers who might default on VAT). This power was strengthened in 2016 to combat VAT evasion by some overseas sellers on online marketplaces (this was part of the “joint and several liability for marketplaces” measure – before the marketplace joint liability rules came in 2018, HMRC sometimes required Chinese/American Amazon sellers to have UK fiscal reps or give security). [gov.uk]

Current policy (2026): HMRC’s public guidance (Notice 700/1) states “If you do not have a business establishment in the UK, you do not normally need a fiscal or tax representative to register for UK VAT.” Instead, you can register directly. However, HMRC may require one if you’re in a country without a sufficient information exchange arrangement. After Brexit, the UK and EU agreed on continued mutual assistance on tax matters (the Trade and Cooperation Agreement includes VAT cooperation), so HMRC did not impose across-the-board fiscal rep requirements on EU businesses. Similarly, businesses from countries like Norway, Canada, etc., where mutual assistance treaties exist, can register directly.

When is a fiscal rep required by HMRC? Typically:

Nature of fiscal rep: If appointed, the UK fiscal representative must be UK-established and is jointly and severally liable for the VAT debts of the non-resident business. That’s why reps usually ask for a bank guarantee or some security from the client. [gov.uk]

Post-Brexit for EU businesses: Initially, there was concern the UK would require EU companies to appoint reps (and vice versa many EU states did impose requirement on UK businesses as of 2021). However, the UK in 2021 passed legislation to waive the fiscal rep requirement for businesses from certain countries, including all EU member states, on the basis of reciprocal tax agreements. Specifically, the Value Added Tax (Accounting Procedures for Overseas Persons) (EU Exit) Regulations 2020 allowed HMRC to continue not requiring reps if mutual assistance is in place. For example, Belgium requires UK businesses to have a fiscal rep because UK is “third country” (though Belgium later waived it for UK in 2021 due to an EU-wide reciprocity list possibly?), but the UK did not reciprocally force Belgian companies to get a rep since there is cooperation via the UK-EU agreement (the excerpt in enterprise content about Belgium confirms Belgium waived requirement for UK due to UK mutual assistance pact).

In short, for EU, Norway, and other cooperative countries, no UK fiscal rep is needed to register – they can “direct register” as before.

Conclusion: In practice, most foreign businesses can register for UK VAT directly, without appointing a fiscal representative. The registration form for non-UK businesses (VAT1) just requires a UK contact address (can be an accountant or business address), but not necessarily a formal fiscal rep. Only if HMRC explicitly issues a notice requiring a rep would one be needed. And those cases are relatively rare and targeted.

Many US, Chinese, EU companies are registered for UK VAT and file returns themselves or via UK accountants, with no fiscal rep. Instead, since 2018, the focus was on making online marketplaces liable if their sellers don’t comply, rather than forcing thousands of sellers to get reps.

After Brexit, some EU countries made fiscal rep mandatory for UK firms (France, Spain, etc.), but the UK didn’t fully reciprocate. Instead, HMRC’s stance is more lenient, trusting the new agreements.

A scenario where HMRC did use this power: Prior to marketplace joint liability rules, HMRC started sending notices around 2017 to some non-EU sellers that they must appoint a UK VAT rep or provide security. This was targeted and is still available for HMRC to use if needed.

Costs: If a fiscal rep is required, the foreign business will have to find a UK-based tax professional willing to act. This can be expensive (they might charge a retainer or require a large security). The representative is often jointly liable, so they often demand a bank guarantee to cover possible VAT debts.