What is the UK low tax rate? UK low tax rate review

introduce

The UK VAT has a low tax rate of 7.5% (1% discount in the first year), which is premised on the import amount and cannot be deducted from the import tax; the normal tax rate of 20% can be deducted from the import tax, but the premise for the deduction is to import with your own tax number.

The low tax rate requires that the import amount must be met (the total amount of imported goods each quarter is required to be at least 2% of the quarterly sales and the import amount is at least greater than 250 pounds) in order to be taxed at 7.5%. If the import amount is not met, the tax will be calculated at 16.5%.

Note: To avoid tax evasion and abuse of rules, the tax bureau stipulates that the following situations need to pay a 16.5% tax rate and cannot be bonded at the above tax rate:

If the expenditure is less than 2% of total turnover per year;

Expenditure exceeds 2% of turnover per annum but is less than £1,000.

tax rate

The Flat Rate Scheme (FRS) is a scheme designed to help small and medium-sized enterprises simplify tax reporting. Using this scheme, you can use a fixed tax rate to declare and pay VAT. This fixed tax rate is not the same, but is determined by industry:

like:

The following conditions must be met for low tax rate declaration:

1. Meet the requirements for UK VAT registration (or have already registered for VAT);

2. The sales volume of FRS in the application form is not more than 150,000 pounds. The data on the application form are all estimates. 150,000 includes sales from the UK to retail consumers in other EU countries. In actual operation, only when the sales volume exceeds 230,000 pounds (accumulated for 12 consecutive months) will you need to withdraw from FRS within 28 days. For the part that does not exceed the threshold, if you have not paid taxes in the EU country, you need to declare and pay taxes in the UK.

3. The value of imported goods every year after registration (shown in C79 or other purchase cost documents) must be greater than or equal to 1,000 pounds;

4. The ratio of the value of imported goods to the sales in the current quarter must be greater than or equal to 2%. If the conditions for low tax rate declaration are not met at the same time, the VAT rate may be defined as a 'limited cost business' by the tax bureau, and the tax rate may be raised to 16.5% of the total sales.

How to join and leave FRS

Regarding the need to join the low tax rate plan midway, as long as you meet the low tax rate conditions, you can apply to join. The tax agent will prepare the FRS600 document for the client to sign. The processing time for this document is three months, so clients must apply early to avoid delaying the next period of declaration using a low tax rate.

How to withdraw from FRS

Regarding exiting the low tax rate plan, the tax agent needs to send an email to notify the tax bureau, and then calculate and submit the tax at the corresponding tax rate before and after the FRS date (that is, 23W is submitted at the low tax rate, and the excess is submitted at the standard tax rate, which is 16.67%).

The processing time is about three weeks and you will receive confirmation.

legislation

According to the autumn financial budget released by the tax bureau in November 2016, in order to reduce the abuse of low tax rates, all merchants currently using the tax rate and those who want to use a lower tax rate will be evaluated after April 2017. For merchants that fail the evaluation, the tax rate will increase from 7.5% to 16.5%! ! This change theoretically has no impact on overseas e-commerce.

References

• 1. UK low tax rate table: official website [cited on 2019-03-12]