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Changes to VAT for Overseas Goods Sold in UK

UK Introduces New VAT Rules

If you're an ecommerce brand selling goods internationally, you need to be aware of new Brexit rules governing the way VAT (Value Added Tax) is collected in the UK. Here are the changes and what they mean for Ruby Has' clients.

Beginning on January 1, 2021, the UK Government is introducing a new VAT model for orders of goods sold to consumers in the UK with a value not exceeding GBP £135. This change will require any merchant not using an online marketplace (OMP) for sales of goods to consumers in the UK to register for UK VAT.

What it Means to E-commerce Brands:

For orders not exceeding GBP £135:

Brands Using an OMP to Sell to UK Consumers

Brands that sell their goods to UK consumers via an online marketplace (OMP) such as Amazon, Etsy, eBay, etc., will not need to do anything differently. Their OMP will collect the VAT at the point of sale, taking care of accounting and forwarding it to the UK’s tax revenue service, HMRC (Her Majesty’s Revenue and Customs).  

Brands Selling Directly to UK Consumers

  • Brands that sell their goods directly to UK consumers without using an OMP (for example, from the brand’s own website), will need to register for the UK VAT.
  • These brands will be responsible for collecting the VAT at the point of sale, taking care of accounting and forwarding it themselves to HMRC. These brands will be required to keep electronic records of their UK sales for a period of 6 years and to provide records electronically to HMRC on request.
  • These brands can register for UK VAT online with HMRC.
  • INCOTERMS will be DDP (Delivered Duty Paid) via these carriers: DHL Direct, DHL Express, UPS, Passport Shipping, Flavor Cloud
  • The GBP £135 value applies to the entire order and not individual items of the order.

For orders exceeding GBP £135:

  • Normal import VAT rules will apply to these orders: import VAT is assessed and due at the time of import and not at the point of sale. 
  • INCOTERMS can be either DAP (VAT paid by the UK consumer) or DDP (VAT paid by the carrier).

Glossary:

VAT: Value Added TaxOMP: Online MarketplaceHMRC: Her Majesty's Revenue and CustomsINCOTERMS (International Commercial Terms): Pre-negotiated terms of trade between buyers and sellers of goods sold internationally, based on a set of internationally recognized terms published by the International Chamber of Commerce.DAP (Delivered At Place): Seller is responsible for all costs and risks until shipment arrives at a specified place. Buyer is responsible for customs clearance, duties, and taxes, as well as unloading.DDP (Delivered Duty Paid): Seller is responsible for all costs and risks of shipment, as well as customs clearance, duties, and taxes. Buyer is responsible for unloading.

Frequently Asked Questions:

Q: Where is the official UK site with details of the change?

A: Changes to VAT treatment of overseas goods sold to customers from 1 January 2021

Q: What was the VAT model that this change will replace? 

A: Under the old model, orders to consumers valued at less than £15 were free from import VAT (Low Value Consignment Relief). Those valued at less than £135 were free from customs duty. VAT/duty was collected and accounted for at the time of import. Sellers outside of the UK did not need to register for VAT.

Q: What is the specific change?

A: Under the new model, Low Value Consignment Relief is eliminated. VAT will apply to any orders valued at £135 or less and must be collected at the point of sale. If the seller uses a marketplace like Amazon, Etsy, eBay, those marketplaces collect the VAT at the time of sale, accounting and forwarding it to the UK. If the seller sells directly to UK consumers (e.g. from their own website), the seller will need to register for VAT and collect the VAT at the time of sale. They will account and forward it to the UK themselves.

Q: What about orders with a value greater than £135?

A: No change. VAT will continue to be collected at the time of import.

Q: Does the £135 threshold apply to individual items in the shipment or to the whole order?

A: It applies to the value of the entire order/shipment.

Q: Is there any change to VAT on business to business orders?

A: No change on B2B orders/shipments.

Q: What INCOTERM applies under the change?

A: The applicable INCOTERM is Delivered Duty Paid (DDP).

Q: Where does a seller register for the UK VAT?

A: Register for VAT - GOV.UK

Q: How long does it take to receive a UK VAT registration number?

A: According to the registration page, about 20 days.

Q: Does Ruby Has need my VAT registration number?

A: Yes, please send your VAT registration number through this form.

Q: Does the change apply to orders in transit on January 1, 2021?

A: No. It only applies to orders sold on or after January 1, 2021. 

Q: What if my question is not listed?

A: Please submit your question by sending us a ticket. Click the bubble on the lower right corner of this page. 

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