Exports of goods from the UK count towards the £90,000 VAT registration threshold, because they are taxable supplies made in the UK at the zero rate. Most services sold to overseas business customers do not count, because their place of supply is outside the UK and so they are outside the scope of UK VAT. Services sold to overseas private individuals sit in between: some count and some do not, depending on the type of service.

What does taxable turnover include?

Section 4(2) of the VAT Act 1994 defines a taxable supply as a supply of goods or services made in the United Kingdom other than an exempt supply (HMRC VAT Registration Manual, VATREG02250). Taxable turnover is the total value of those supplies made in the course or furtherance of business, excluding VAT (VATREG02300). The current registration threshold for taxable supplies is £90,000 (VAT Notice 700/1 supplement), tested on a rolling 12 month basis and on a 30 day forward look; see VAT registration threshold and the rolling 12 month test.

Two words in that definition decide the treatment of overseas sales: “in the United Kingdom”. VATREG02550 says that, when calculating taxable turnover under paragraph 1 of Schedule 1, the value of supplies with a place of supply outside the UK must be disregarded. Zero rated sales, by contrast, are included: GOV.UK’s Register for VAT guidance lists zero rated goods as part of taxable turnover. So the question for every overseas sale is whether its place of supply is the UK.

Do exports of goods count?

Yes. Goods located in the UK when supplied are supplied in the UK, and the removal of goods from the UK for export is a supply in the UK (VAT Notice 700, paragraph 4.8.2). An export is a zero rated supply, a supply that is subject to VAT but at 0% (VAT Notice 703, paragraph 2.1). A UK online shop selling to customers in the United States and Australia must include those sales when checking the threshold, and goods sent to the Channel Islands are exports in the same way (see VAT on sales to the Channel Islands and Isle of Man).

Some sales of goods never reach UK turnover:

  • goods located outside the UK when supplied, for example stock shipped from a supplier in Asia straight to a customer in Canada, are not exports and are outside the scope of UK VAT (Notice 703, paragraph 2.2)
  • goods you supply and install outside the UK are supplied in the country where they are installed (Notice 703, paragraph 2.12)
  • goods sent abroad temporarily, for exhibition or on sale or return while you still own them, are not a supply at that point (paragraph 2.12)

Isle of Man sales are not overseas sales at all. HMRC adds together taxable supplies made in the UK and on the Isle of Man when deciding whether a person must register (VATREG45150).

Do services to overseas business customers count?

Usually not. Under the general business to business rule, a service is supplied where the customer belongs (VAT Notice 741A, paragraph 6.3). Consultancy, design, software development or marketing for a company in Germany or New York is supplied outside the UK and is disregarded. You need evidence that the customer is in business and belongs abroad; see proving an overseas customer is in business.

The general rule gives way to special rules (Notice 741A, paragraph 6.4). Where a special rule puts the place of supply in the UK, the sale counts even though the customer is overseas. Examples include admission to an event held in the UK, services directly connected with UK property such as surveying or repairing a building here, and restaurant and catering services physically carried out in the UK. The full rules are in our guide to place of supply of services.

What about services to overseas private individuals?

The general rule for business to consumer services is that the supply is made where the supplier belongs (Notice 741A, paragraph 6.2). For a UK business, that means a UK supply, which counts towards taxable turnover even when the customer lives abroad.

Section 12 of Notice 741A carves out a list of services which, when supplied to consumers belonging outside the UK, are supplied where the customer belongs and so are outside the scope. They include the services of consultants, engineers, lawyers and accountants, advertising, banking, financial and insurance services, supply of staff, hire of goods other than means of transport, and transfers of copyright, patents and similar rights. A UK lawyer advising a private client in Dubai does not count that fee. A UK personal trainer coaching a visiting overseas client in a London gym does count it.

Digital services to consumers follow their own rule: Notice 741A, section 14, says the place of supply of electronically supplied, telecommunications and broadcasting services to consumers is where the consumer is located.

If my overseas sales do not count, can I still register?

Possibly. Paragraph 10 of Schedule 1 allows voluntary registration for a person who does not make taxable supplies in the UK but makes supplies outside the UK that would be taxable if made here, provided they have a business establishment or usual place of residence in the UK (VATREG23200). HMRC’s guidance at VATREG23250 adds that applicants are eligible only if they also incur UK VAT they would be entitled to recover, receive reverse charge supplies, or import goods. Input tax relating to supplies made outside the UK that would be taxable in the UK is recoverable (Notice 741A, paragraph 2.7). A business that makes some UK taxable supplies can register voluntarily in the ordinary way; see voluntary VAT registration.

The opposite situation also exists. An exporter whose taxable supplies are mostly zero rated can ask HMRC for exemption from registration, even if it is over the threshold (GOV.UK, Register for VAT). If HMRC refuses, it registers the business.

What else can catch a business with overseas customers?

  • Services bought from abroad. GOV.UK lists services received from businesses in other countries that you had to reverse charge as part of taxable turnover. A UK business with modest UK sales that buys substantial services from overseas suppliers can cross the threshold this way.
  • Capital asset sales. Sales of capital assets used in the business are disregarded under paragraph 1(7) of Schedule 1, except that a supply of an interest in property taxable other than at the zero rate must be included under paragraph 1(8) (VATREG02600).
  • Overseas businesses. Since 1 December 2012 the threshold has not been available to non established taxable persons, who must register if they make any taxable supplies in the UK (Notice 700/1 supplement).

How would the figures work?

Illustration only. Two UK businesses each have £120,000 of sales in the last 12 months.

Sales Consultancy firm Online retailer
UK customers £30,000 £55,000
Overseas business customers £80,000 (outside the scope) £25,000 of exported goods (zero rated)
Overseas private individuals £10,000 of consultancy (outside the scope under section 12) £40,000 of exported goods (zero rated)
Taxable turnover £30,000 £120,000

The consultancy firm is well below the threshold despite its total sales. The retailer must register, because every one of its sales is of goods supplied from the UK.

What mistakes come up most often?

  • Leaving zero rated exports out of the threshold calculation on the basis that no VAT is charged on them.
  • Counting fees from overseas business clients, which are outside the scope under the general rule.
  • Excluding services to overseas consumers that are not on the section 12 list, such as coaching or entertainment performed in the UK.
  • Not keeping evidence of where customers belong and that business customers are in business.
  • Forgetting reverse charged services received from overseas suppliers.

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Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 19 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.