VATREG37150 - Non-established taxable persons (NETPs): what is an NETP?

What is an NETP?

Non-established taxable person (NETP) is used to describe a person who is liable to be registered for VAT under Schedule 1A to the VAT ACT 1994.

Other than not already being registered, paragraph 1 of Schedule 1A sets three conditions which must be met:

  • The person makes taxable supplies in the UK, or intends to do so in the next 30 days
  • Those supplies are made in the course or furtherance of a business
  • The person has no establishment or fixed establishment in the UK

You can find information on the first condition at VATREG02100 and VATREG02250, and the second condition at VBNB20200. We cover the third condition below.

UK Establishment

Establishment is not defined in legislation for VAT purposes and is derived from case law.

A UK establishment will exist if either:

  • the place where essential management decisions are made and the business’s central administration is carried out is in the UK
  • the business has a permanent physical presence with the human and technical resources to make or receive taxable supplies in the UK.

To determine if there is a UK establishment you should consider where the day-to-day activities and running of the business take place. This is usually where the principal place of business (PPOB) is located [VATREG03550].

For this reason, a third-party UK address or company incorporated in the UK will not by itself be sufficient to create a UK establishment.

For example:

  • A company incorporated in the UK would not alone constitute a UK establishment. You would need to consider the extent to which the management and running of the business takes places in the UK.
  • Goods imported into the UK and sold from a UK fulfilment address or similar warehouse, with a sole purpose to send and receive goods, is unlikely to create a UK establishment. You may need to consider if the business has resources or employs its own staff in the UK.
  • A registered, serviced or virtual office address or mail forwarding service will not create a UK establishment.

If the business is found to have a UK establishment, it is not an NETP and cannot be registered under Schedule 1A. It may be liable or entitled to register under Schedule 1 or Schedule 3A of the VAT Act.

Note: We do not consider businesses established in the Isle of Man to be NETPs. They continue to benefit from the UK VAT registration threshold.