Key matters regarding UK VAT FRS declaration

In the UK, value-added tax (VAT) declaration has always been a topic of great concern to sellers and related parties. There are two main ways to declare VAT: Standard Rate Reporting (STN) and Low Rate Simplified Scheme (FRS). Since 2017, the FRS tax rate has been adjusted and there are now two different tax rates, 7.5% and 16.5%.

Eligibility requirements for FRS declaration

To apply for FRS, a company first needs to register a VAT tax number in the UK, and its estimated annual total sales will not exceed 150K pounds (excluding tax) and 180K pounds (including tax). After successfully applying for FRS, most quarterly reports must meet the following conditions in order to apply the 7.5% tax rate for tax calculation:

1. When products need to be imported to the UK during the current season, the VAT number under your personal name should be used for import customs clearance.
2. Import duties on goods imported during the season should exceed £41.67.
3. The declared value of imported products and the total quarterly import tax must be greater than or equal to 2% of total sales.

If the above conditions cannot be followed, the FRS quarterly reporting rate will be calculated as high as 16.5%.

Notes on import customs clearance

When implementing import customs clearance, if goods are imported through third-party express delivery (such as DHL, UPS, FedEx, etc.), the seller needs to provide the corresponding logistics C88 invoice and import customs clearance file. These documents must clearly indicate that the name and address of the importer are consistent with the tax number of the seller’s name and registered address in order to meet the conditions for FRS declaration. In addition, if you use someone else’s tax number for import and customs clearance, you will not be able to apply for quarterly FRS (low tax rate) declaration, and you must use the regular quarterly declaration method.

Advice on seeking professional help

In view of the complexity and potential risks in FRS filing, it is recommended that sellers seek the assistance of a professional third-party tax agency to avoid the following possible problems:

1. Lack of local tax address in Europe.
2. Mail processing time is too slow.
3. Unable to receive C79 files, thereby losing the opportunity for VAT deduction.
4. The tax address filled in the VAT registration background does not comply with regulations, especially Chinese addresses that often fail to pass approval.
5. Other tax issues caused by unprofessional filing.

Sellers should fully understand the relevant requirements and processing procedures of FRS declaration to ensure compliance and reduce risks.