VATREG37250 | Non-established taxable persons (NETPs): exemption from registration

Paragraph 13 of Schedule 1A to the VAT Act 1994 provides that a person who makes only zero-rated supplies in the UK, or would do if they were a taxable person, can apply for exemption from registration.

A person can request exemption when completing their registration application or at a later date. In practice, HMRC will agree exemption where the conditions are met, and the business will usually be in a net repayment position.

Overseas businesses that import goods into the UK, which are then sold to non-business customers using an online marketplace, can request exemption from registration as the supply to the online marketplace is deemed to be zero-rated. However, it is often beneficial for the overseas business to register so they can reclaim import VAT.

If there is a change in the nature of the supplies made by the exempted person, for example they make a standard or reduced rate supply in the UK, there is usually a requirement to notify HMRC within 30 days of the change – paragraph 13(3), Schedule 1A. This will occur where goods sold via an online marketplace are purchased by a UK VAT registered business, creating a taxable supply not covered by the deemed zero-rated supply provisions.

Note: Do not confuse exemption with exception from registration. Schedule 1A does not provide for exception from registration, like that afforded to UK established businesses, as there is no registration threshold.