In this Brexit article, we outline the new rules which affect non-UK established sellers (i.e. sellers established in the EU 27 Member States or other third countries).
With effect from 1st January, 2021 overseas sellers may have an obligation to register and account for VAT in the UK. This will depend on whether they are selling directly to UK consumers (B2C), via an Online marketplace (OMP) or direct to UK businesses (B2B). An OMP is a website or any other means by which information is made available over the internet, facilitating sales of goods to customers by persons other than the operator. An example of this would be Amazon or eBay.
The new rules outlined below, apply to consignments not exceeding £135 in value and change the point at which VAT is collected from the point of importation to the point of sale. The £135 threshold applies to the consignment’s value, not to each individual item within the consignment.
B2C sales (consignment less than £135)
The non-UK established seller must charge UK VAT on their sales to UK customers at the point of sale.
This will mean ongoing VAT compliance obligations (VAT registration, invoicing, returns and payments to HMRC).
There is no minimum VAT registration threshold for non-UK established sellers. VAT registration is mandatory for non-UK established sellers who make sales to UK customers, unless you are an EU business already UK VAT registered under the distance selling rules (in which case you can continue to use your existing UK VAT registration).
B2C sales (consignment less than £135) via an OMP
The overseas seller will be deemed to have made a B2B supply to the OMP which is outside the scope of VAT. This means that there will not be any UK VAT accounting obligations for the seller.
The OMP will be deemed to have made a B2C supply to the customer and be responsible for collection and payment of VAT, along with the requirement to issue a VAT invoice. Therefore if the OMP is not already UK VAT registered it will need to obtain a registration.
Direct sales to UK business customers (B2B consignment less than £135)
The seller may avoid charging VAT if they hold the UK VAT registration number of the business customer. A VAT invoice should be issued with a notation that VAT is to be accounted by the UK business customer by way of a reverse charge on their UK VAT return.
B2B sales (consignment less than £135) via an OMP
As with B2C sales via an OMP outline above, the seller will be deemed to have made a supply to the OMP outside the scope of VAT and will have no UK VAT accounting obligations.
If the OMP holds the VAT registration number of the business customer, there will be a deemed B2B zero-rated supply by the OMP to the business customer. Therefore the OMP need not charge or collect VAT, but will need to issue a VAT invoice noting that VAT will be accounted by the business customer by way of a reverse charge on their UK VAT return.
Finally, please note that these rules do not affect sales of goods located outside the UK at the time of sale whose value exceeds £135. In these cases, either the customer or the seller will be responsible for payment of import duties and VAT depending on the terms of sale. Therefore, you will want to review your contract terms to ensure that responsibilities for customs formalities and payment of duties/import VAT are made clear.
HMRC have reiterated their policy that only the owner of the goods is eligible to reclaim import VAT and must include its EORI number in the customs declaration.
Further details on importing goods into the UK are available within our Brexit Resources on our website.