UK VAT for a non-UK software company: the first-pound rule, quarterly returns and what an agent costs

A software company in the US, Canada or Singapore sells its first GBP 30 subscription to a person in Manchester. The familiar UK VAT threshold does not help. HMRC's Notice 700/1 says a non-established taxable person must register when it makes any taxable UK supply, regardless of value, including digital services. In plain English: the first taxable pound starts the obligation.

This guide is for an automated SaaS, download, hosting service or similar digital product sold by a company with no UK establishment. It covers consumer sales, the different answer for business buyers, registration, Making Tax Digital, the quarterly calendar and a worked cost comparison. Rules and prices were checked on 11 November 2026. This is general information, not advice on your facts.

The GBP 90,000 threshold is not your threshold

A UK-established business normally watches the rolling VAT registration threshold, currently GBP 90,000. A company with no business or fixed establishment in the UK is a non-established taxable person, or NETP. HMRC gives that seller no registration threshold for taxable supplies made in the UK.

The line between software and a service delivered by a person matters. HMRC treats hosting, downloads and supplies that are essentially automated as digital services. A live class or consulting session with meaningful human delivery can follow a different rule. Split a mixed package only after checking whether it is one bundled supply.

B2B is usually the reverse charge

For a general-rule service sold by an overseas company to a UK business, the place of supply is where the customer belongs and the customer accounts for VAT under the reverse charge. You do not add UK VAT to that invoice. HMRC says a VAT registration number is the best evidence, but it also accepts other commercial evidence that the customer is in business. If the buyer supplies neither, treat the sale as B2C and charge VAT.

Keep the evidence with the sale: the VAT number and its validation result, or documents showing the business name, address and activity. Put the customer's details and a reverse-charge note on the invoice. A checkout box saying 'business' on its own is weak evidence.

Register in five steps

1. Fix the effective date. If the first taxable consumer sale has happened, HMRC says tell it within 30 days of that sale. If you expect one in the next 30 days, apply within that period. The effective date is not something to postpone until revenue grows.

2. Collect the company file. Have the foreign registration document, tax number, trading address, bank details, directors or owners, expected UK turnover, the product description, website and evidence of the first UK sale ready. HMRC may ask for translated documents or more evidence.

3. Apply online. HMRC's VAT registration service accepts NETP applications. You can deal with HMRC yourself or appoint an agent. A tax representative is a different, heavier appointment: the representative keeps the records and is jointly and severally liable for VAT debts. Do not buy that service when an ordinary agent is all you need.

4. Price for the waiting period. HMRC says not to show VAT as a separate invoice item before the number arrives. You can raise the price to reserve the VAT you will owe, then reissue a VAT invoice after registration. The effective date can reach back to the first sale.

5. Set up the VAT online account and software. The registration letter gives a nine-digit number, effective date and first return period. Add the tax to the business tax account. HMRC automatically puts new registrations into Making Tax Digital unless an exemption applies.

Making Tax Digital is the filing route, not another tax

All VAT-registered businesses should keep VAT records digitally and submit returns through MTD-compatible software. HMRC does not provide a form where a new business can simply type the nine return boxes. An accounting package can file them, or bridging software can send totals from a spreadsheet while preserving the required digital links.

The general rule is one calendar month and seven days after the period ends. The return and cleared payment share the deadline, including when it falls on a weekend or bank holiday. File even when the quarter has no sales or VAT due. The dates HMRC assigns can differ, so copy them from the online account rather than relying only on this calendar.

What the VAT does to GBP 3,000 and GBP 30,000 a month

The standard UK rate is 20%. Whether VAT sits on top of the advertised price or inside it changes what the company keeps. The following assumes every sale is a UK consumer sale, no input VAT is reclaimed, and revenue is steady for three months. Real B2B and non-UK sales come out before this calculation.

The most common early mistake is to collect GBP 3,000, spend it as revenue, then discover that GBP 500 of it belonged to HMRC. Keep the VAT in a separate balance as each payment arrives.

Agent filing against a merchant of record

HMRC charges nothing to register. One UK practice, City Solution, published a 2026 NETP registration price from GBP 595 and MTD return filing from GBP 175 a quarter. That makes the published compliance bill GBP 1,295 in year one and GBP 700 in a later year, before bookkeeping or unusual work. It is one public price, not a market average; get a written scope and quote.

A merchant of record such as Paddle becomes the retail seller and handles payment processing, VAT calculation, returns, remittance, refunds and chargebacks. Paddle publishes 5% + 50 cents per transaction. To make the fixed part readable in pounds, the model below assumes GBP 0.50 and a GBP 30 average sale. Check the currency and negotiated rate in your own contract.

This is not a complete checkout comparison. The own-filing route still pays its payment processor, billing, fraud and possibly tax software costs; the MoR fee includes more and can cover tax registrations outside the UK too. At these assumptions, the first-year UK agent bill equals the MoR fee at about GBP 1,619 of monthly sales, and the later-year bill at about GBP 875. Above that, own filing is cheaper for UK compliance alone. Below it, the saved setup and worldwide tax work may be worth more than the difference.

The first quarter checklist

- Separate consumer, UK-business and non-UK sales at checkout.
- Store the buyer's country and business evidence with each invoice.
- Apply within 30 days of the first taxable UK sale; reserve VAT while HMRC processes it.
- Decide whether prices are VAT-exclusive or VAT-inclusive before the next invoice.
- Connect an MTD-compatible ledger or bridging tool.
- Reconcile sales, refunds and VAT before the quarter closes.
- Put the assigned return and payment date in two calendars.
- File a nil return when nothing was sold.

The UK is simpler than the EU in one way: one rate, one registration and one return. It is less forgiving in another: a seller outside the UK does not get the domestic small-business threshold. If the same company also sells to EU consumers, the systems are separate; our companion guide explains the non-Union OSS registration and its 27-country return. For US sales, see the state-by-state SaaS sales tax and nexus guide.

Sources

Official guidance read 11 November 2026: HMRC Notice 700/1, who should register for VAT (NETP first-supply rule, 30 days, agents and representatives); HMRC, VAT rules for digital services to consumers (digital services and business evidence); HMRC Notice 741A (B2B place of supply and reverse charge); HMRC, register for VAT (online steps and waiting for the number); HMRC, Making Tax Digital for VAT (automatic enrolment and compatible software); HMRC, sending a VAT Return (quarterly returns and one-month-seven-day deadline); HMRC VAT rates (20% standard rate). Prices read the same day: City Solution UK VAT registration pricing (NETP GBP 595, return GBP 175); Paddle 101 (merchant-of-record scope and published 5% + 50c price). The VAT, annual fee, difference and break-even figures are our arithmetic from those rates and the assumptions printed beside them.