The EU rules for cross-border supplies and movements between Member States will no longer apply in the relations between Member States and the United Kingdom (e.g. no distance sales regime for goods to and from the United Kingdom).
Instead supplies and movements of goods between the EU and the United Kingdom will be subject to the VAT rules on imports and exports. In this context, UK reformed the VAT treatment of imported parcels up to £ 135 and made online marketplaces liable for VAT.
Goods under £135 directly sold by EU businesses to UK individuals
New rules will apply when a EU business sells goods for £135 or less to a UK customer and the goods are located outside the UK at the time of the sale. In essence, the point at which VAT will be collected will move from the point of importation to the point of sale. In effect, import VAT will not be payable on the importation of these consignments but UK ‘supply’ VAT will be payable at the point of sale:
- the value of the goods for VAT purposes will be based on the price at which they are sold to the consumer rather than any valuation calculated at the point of importation.
- The £135 threshold is determined per consignment, and not on individual goods within a consignment. A consignment’s value is based on the VAT exclusive price of the goods in the consignment and does not include separately stated freight charges. The threshold is intended to align with the threshold for customs duty liability.
For goods sent from overseas and sold directly to UK consumers without OMP involvement the new rules can therefore be summarized as follow:
- VAT registration is required : the overseas seller will be required to register and account for the VAT to HMRC. There is no VAT registration threshold for businesses not established in the UK, so the seller is liable to register and account for VAT as soon as it starts making sales or holds stock for sale in the UK.
- VAT is not due on import of goods. Although these arrangements will mean that for many consignments not exceeding £135 in value there will no longer be any VAT to collect at the border, customs declarations will still be required for non-fiscal purposes. However, in recognition of the changed role of the customs declaration for affected consignments, a number of facilitation’s, including the use of reduced data sets and bulk declarations will be available.
- UK VAT is due on the sale.
- Invoice: the seller will be required to provide the customer with a VAT invoice at the point of sale. The normal rules for the content and format of VAT invoices will apply, so the invoice can be in paper or digital form and will be covered by the existing concessions for simplified invoices. Read more information on record keeping.
- Where the sale is direct from the seller to the consumer without the involvement of an OMP, there will be a requirement for the seller to ensure that a copy of the tax invoice accompanies the goods in transit. This can either be in digital or paper format and could be inside the consignment or be uploaded electronically by a parcel carrier or freight operator.
- Record keeping : direct sellers will be required to keep electronic records of their sales for a period of 6 years and to provide records electronically to HMRC on request.
Goods under £135 sold via Online Marketplaces
Online marketplaces (OMPs), where they are involved in facilitating the sale, will be responsible for collecting and accounting for the VAT.
Goods imported exceeding £135
If the amount for imported goods exceeds £135 then normal VAT and customs rules will apply, meaning that import VAT will be chargeable and so supply VAT should not be charged at the point of sale.
Goods already in the UK sold via Online Marketplaces
Online marketplaces will also be liable to collect VAT on a second class of supplies: specifically, the sale of goods, which are located in the UK at the time of sale but which are owned by a seller based outside the UK, through an online marketplace to UK customers. Where goods are located in the UK at the point of sale but are sold through an online market place, then irrespective of the value of the supply, the online market place will be deemed to make the supply of the goods to the customer. This change ensures that VAT on UK supplies is charged, collected and paid over to HMRC by the online market place and reduces the risk of non-compliance by overseas suppliers. As it will be the online market place that is deemed to be making the supplies, overseas suppliers may no longer be liable to be registered for UK VAT. Platform liability is triggered despite the foreign seller having a VAT registration in the UK.
This strand of the measure will apply to goods of any value where the:
- goods are owned by a seller who is based outside the UK
- goods are located in the UK at the point of sale
- seller sells the goods to a customer in the UK through an online marketplace
- supply is not to a VAT registered business
The following VAT treatment will apply.
- The goods will already have been imported into the GB from outside the UK and existing VAT and duty obligations applied upon importation.The overseas seller will have to register for VAT in the UK and reclaim any import VAT it has incurred in the course of importing the goods, subject to the normal rules for VAT deduction.
- UK VAT will be due at the time the sale of goods takes place as it is now, but the significant change here is that the OMP will be deemed to be the supplier and so liable to account for the VAT on sales facilitated through its marketplace. This means that for VAT purposes the seller, operating through an OMP, will no longer be making a supply to consumers in the UK.
- At the point the goods are sold to the customer, the overseas seller will be deemed to make a zero-rated supply of the goods to the OMP. The overseas seller should show the value of its supplies in box 6 of its VAT return (value of sales) but will not be responsible for declaring VAT on those deemed sales made through the OMP.
OMP liability will not apply to business to business sales where the goods are in the UK at the point of sale. The business recipient will need to provide a valid UK VAT registration number to show that the supply is business to business sale. If not provided, the sale should be treated as a business to consumer transaction. Where a valid VAT registration number is provided the supply will be considered from the overseas seller, rather than the OMP, to the business recipient and will follow existing VAT rules.
There is no obligation for the OMP to show that the supply is a business to business sale. They should treat the sale as a business to consumer sale unless the business customer provides a VAT valid registration number.
For sales by non-UK sellers that are not facilitated by an OMP, where the goods are located in the UK at the point of sale, the existing rules remain unchanged, such as the seller remains liable to register and account for VAT on all such sales to UK customers.