Key points
- A UK company must register for UK VAT once its UK taxable sales go over £90,000 in any rolling 12 months, or if it expects to go over £90,000 in the next 30 days alone.
- The £90,000 threshold is a UK rule. EU countries give a UK business no threshold: VAT on sales to EU consumers is usually due from the first sale.
- If your checkout does not record where the customer is, you cannot show the sale happened outside the UK, and you reach the UK threshold sooner than you think.
- Since 2024, EU payment providers report sellers' cross-border payments to tax authorities. Unpaid VAT is now found, often a year or two later.
Mistake 1
Not knowing you need to register at all
Many online sellers simply trade. Sales grow to hundreds of thousands, sometimes millions of pounds, and nobody registers for VAT anywhere until the first letter arrives from a tax authority. That letter does not always come from HMRC. We have seen clients receive VAT demands from Germany for online sales to German customers.
The reason is simple: your VAT obligations depend on where your customers are and where your stock is, not only on where your company is registered. A UK company can owe VAT in several countries at once.
Since 1 January 2024, banks and payment providers such as card processors and wallets keep records of everyone who receives more than 25 cross-border payments a quarter, and send them to EU tax authorities through a central system called CESOP. Tax authorities share this data with each other. When they find a seller with many sales into their country and no VAT number, they can assess VAT on all those sales.
A UK company sells through its own website and keeps stock in a fulfilment warehouse in Germany so that deliveries are faster. From its first sale out of that warehouse to a German customer, German VAT is due and the company usually needs a German VAT number. There is no threshold.
Mistake 2
Thinking you have nothing to do until £90,000
Sellers often believe that a UK-registered company only needs to think about VAT once it reaches the £90,000 threshold. That is true only for UK sales. For sales to consumers in the EU, a UK company usually has to account for VAT from the first pound.
The EU does have a €10,000 threshold for cross-border sales, but it applies only to businesses established in an EU country. Since Brexit, a UK company is a non-EU business and cannot use it.
| What you sell to EU consumers | VAT position for a UK company | How it is usually reported |
|---|---|---|
| Online courses, downloads, apps, other digital services | VAT of the customer's country from the first sale | One registration under the non-Union One Stop Shop (OSS) in one EU country |
| Goods sent from the UK in parcels worth up to €150 | Import VAT of the customer's country | Import One Stop Shop (IOSS): VAT charged at checkout, one registration for all EU countries |
| Goods sent from the UK in parcels over €150 | Import VAT and any customs duty at the border | Paid on import, by you or the customer, depending on your delivery terms |
| Goods sold from stock held in an EU warehouse | VAT of the country where the stock is, from the first sale | Local VAT registration in that country, plus OSS for sales to other EU countries |
You may hear about a "single EU VAT number". It does not exist for every purpose, but the OSS and IOSS schemes let you report sales to consumers in all 27 EU countries through one registration in one country. Stock held in an EU warehouse still needs a local registration.
Inside the UK, there are two tests. At the end of every month, add up your UK taxable sales for the last 12 months; if they are over £90,000, you must tell HMRC within 30 days of the end of that month. Separately, if you expect to go over £90,000 in the next 30 days alone, you must register straight away. A business that is not established in the UK has no UK threshold at all.
Mistake 3
A checkout that does not record where the customer is
Payment forms on websites and payment platforms are often set up with only a name and card details. The customer's country is never collected. That looks harmless, but VAT depends on where the customer is.
If you have no evidence that a sale was made to a customer outside the UK, HMRC will usually treat it as a UK sale made by your UK company. Those sales count towards the £90,000 threshold and carry UK VAT. This is why sellers go over the threshold sooner than they expect.
The evidence rules are strict. For digital services sold to EU consumers you normally need two pieces of evidence that agree with each other, such as the billing address, the country of the bank or card, and the IP address. For goods sent abroad, you need proof of export to zero-rate the sale in the UK.
- Billing country and full address
- Delivery address for goods
- Country of the card or bank account
- IP address country at the time of purchase
- The VAT number of business customers
And your payment platform must let you export these details with each sale, so your accountant can report sales by country.
Marketplaces vs your own website
Most of the online sellers we work with sell through Amazon, both directly and through intermediary arrangements, through eBay and other marketplaces. But the largest part of our work is with businesses that sell from their own websites, and this is where we find the most mistakes.
Marketplaces
- In many cross-border cases the marketplace is treated as the seller for VAT and collects the VAT itself, for example on low-value imports and on sales by overseas sellers.
- Marketplaces report sellers' sales to tax authorities, including HMRC.
- But a UK seller selling stock held in the UK is still responsible for its own UK VAT registration.
Your own website
- Nobody collects VAT for you. Every setting, from the checkout to the tax rates, is yours.
- Payment providers still report your cross-border payments to EU tax authorities.
- Mistakes are often found years later, when they are most expensive.
Read more: Marketplaces now report your sales to HMRC.
A case from our practice: £3.5 million of sales and VAT nobody had looked at
An online retailer came to us for a review of its financial statements. A long-established British accountancy firm had already reviewed the accounts once and made adjustments. But the corrected figures were still wrong. The earlier accountant had accepted the seller's word that UK sales were under the threshold, instead of analysing the full sales data.
None of the previous accountants, neither those keeping the books nor those who reviewed them, told the company that it needed to register for VAT in EU countries or use the One Stop Shop, although it sells to EU customers.
UK sales had passed £90,000 in the previous year and reached around £150,000. The UK registration was overdue, and VAT was due on sales since the date the company should have registered. That VAT was never built into the prices. On top of that, more than a million pounds of sales to EU customers had no VAT accounted for at all. Total sales over the period were around £3.5 million.
Correct the accounts for every period, record sales by country properly, and register for VAT urgently in every country where it is required. Not every country will need a payment, but a large part of the VAT will have to come out of the company's own margin, because it was never charged to customers.
For the owners this was a shock: a liability they did not know existed. The lesson is that a review must test the sales data itself, by country and by channel, not the seller's own estimate. Telling a tax authority about a problem before it contacts you usually reduces the penalties.
Check your numbers
General guidance for a UK company, not advice for your situation. Rates are standard rates; reduced rates can apply to some goods.
6-question self-check
What to prepare before your consultation
The more we receive before the meeting, the deeper we can go. Tick off what you have:
0 of 8 ready
When you book, you accept our terms of engagement, so you can share full information with us in confidence. Your booking is a contract, and we take the same responsibility as under any signed agreement.
One piece of advice
Talk to an accountant before you set up your marketplaces, your website and your payment forms. At that stage an hour's consultation is enough to learn what you can and cannot do for the way you plan to sell, and what to watch for. These mistakes are expensive to fix later, and some cannot be fixed at all.
Test yourself
1. Your UK company sells online courses to consumers in France. When is French VAT due?
A UK company is a non-EU business, so there is no threshold for digital services sold to EU consumers.
2. Your checkout does not record the customer's country. What is the main risk?
Without evidence that the customer is abroad, the sale is usually treated as a UK sale and counts towards the £90,000 threshold.
3. At the end of March, your UK sales for the last 12 months reach £91,000. When must you tell HMRC?
You have 30 days from the end of the month in which you went over the threshold.
4. You should have been registered but did not charge VAT. A customer paid £120. How much UK VAT does HMRC expect?
The price is treated as including VAT: at 20%, one sixth of £120 is £20, and it comes out of your margin.
Law and sources
- Value Added Tax Act 1994, Schedule 1UK registration: rolling 12-month and 30-day tests
- HMRC VAT Notice 700/1: who should register for VATThreshold of £90,000 from 1 April 2024, deadlines
- Value Added Tax Act 1994, section 5AUK online marketplaces treated as the seller
- Finance Act 2008, Schedule 41Penalties for registering late (failure to notify)
- HMRC VAT Notice 703: goods exported from the UKEvidence needed to zero-rate exports
- Council Directive 2006/112/EC, Article 14a and Articles 358–369xEU marketplaces as deemed supplier; OSS and IOSS schemes
- Council Implementing Regulation (EU) No 282/2011, Articles 24a–24fEvidence of where a customer is located
- Council Directive (EU) 2020/284 (CESOP)Payment providers report cross-border payments
- European Commission: CESOPMore than 25 cross-border payments a quarter; data shared via Eurofisc
This guide explains the rules in general terms as at 4 October 2026. It is not advice for your situation. Rules and rates change.
