Finance and Tax for International Businesses

Finance and Tax for International Businesses

How VAT Works in the UK (PVA, EU VAT OSS)

Introduction

After Brexit, the UK's VAT system was completely separated from the EU system. For Polish exporters and importers, this means a need for separate registration and reporting. Although the VAT rules are similar (standard rate 20%, reduced rates of 5% and 0%), the UK does not take part in the EU's OSS/IOSS systems.

---

1. VAT registration in the UK and thresholds

• Registration threshold for local businesses: £90,000 a year (from 2024).
• For overseas businesses: no threshold – the obligation to register arises from the first sale in the UK.
• A VAT number is needed to use Postponed VAT Accounting (PVA).

---

2. Postponed VAT Accounting (PVA)

• A mechanism in place since 2021 that lets importers avoid paying VAT at clearance, instead accounting for it on the VAT return and reclaiming it immediately.
• Improves cash flow – there is no need to "tie up" 20% of the value of the goods.
• Requirements: a UK VAT number, a GB EORI number, and the appropriate note on the customs declaration.

---

3. EU VAT OSS (One Stop Shop)

• A system in place since July 2021 that allows B2C VAT across the whole EU to be reported from a single country.
• Cross-border sales limit: €10,000 a year.
• Makes it easier for Polish companies to trade within the EU, but does not cover the United Kingdom.
• Exception: Northern Ireland – EU VAT on goods still applies there (under the Windsor Framework / Northern Ireland Protocol).

---

4. Small parcels and marketplaces

• The UK has abolished the VAT exemption for shipments of £15 or less.
• For shipments up to £135 sold through a marketplace (Amazon, eBay) – it is the platform that charges and remits VAT.
• For goods over £135 – import VAT is paid by the customer or the seller (if using DDP).

---

5. Export and import – basic rules

• Supplies from the EU to the UK = export (0% VAT in the EU).
• Import into the UK = VAT due to be accounted for.
• Services: subject to the place-of-supply rule based on the customer's location – there is no MOSS system for the UK, and separate registration may be required.

---

6. VAT in practice – tips for businesses

✅ Register for UK VAT if you sell directly to consumers.
✅ Use PVA – it will improve your cash flow.
✅ When shipping to the EU – use OSS to avoid multiple VAT registrations.
✅ Remember the special rules for Northern Ireland.
✅ Outsource your accounting to local UK advisers – it will simplify quarterly/monthly reporting.

---

VAT in the United Kingdom works similarly to the EU, but requires separate procedures. The biggest difference is the lack of OSS/IOSS in the UK, meaning separate VAT registration is required. On the other hand, PVA gives importers significant relief. A well-planned tax and logistics policy helps Polish companies avoid costly mistakes and stay competitive in the UK market.