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Changes to UK VAT for businesses selling to the UK

For the eCommerce community around the world, Brexit has left no shortage of unanswered questions, particularly for those who regularly do business with the UK. 

One topic every small business owner selling to the UK should familiarise themselves with is the new VAT treatment of commercial goods imported into the UK. Taxes and duties are often challenging to understand, but merchants need to be proactive about ensuring they are up to date and compliant with the new rules. 

Here’s what online merchants and marketplaces need to know.

The Brexit effect 

Following a nation-wide referendum in June 2016, the UK officially exited the European Union on 31 December 2020, a process commonly referred to as Brexit.  

On 1 January 2021 new rules and regulations came into force and the changes will have implications for online merchants shipping goods to the UK now, and into the future.

Who is impacted? 

All sellers including online retailers, marketplace sellers and international businesses selling directly to the UK are impacted by this change.

This does not affect anyone sending personal (non-business) parcels to the UK.

Changes to the UK VAT that online merchants need to know 

On 1 January 2021, the UK Government introduced a new treatment of VAT on commercial goods imported to the UK. 

For online merchants, key changes include:

UK VAT is now collected at the point of sale

Prior to Brexit, VAT on commercial goods valued at less than £135 was payable during importation at customs. But from 1 January 2021, VAT is now payable at point of sale, or checkout, for goods under £135. This value relates to the entire purchase, not the value of individual goods in one purchase. 

There are no changes to the current process for commercial goods above £135. VAT on these items will continue to be charged to the recipient. There are also no changes to the VAT treatment on consumer to consumer and personal (non-business) goods.

*Please note Sendle only offers DDU (Delivery Duty Unpaid) shipping to the UK.  

No more low-value consignment relief on imported goods under £15

Previously there was no VAT charged on goods valued at £15 or less. On 1 January 2021, the UK Government removed the low-value consignment relief, so any consignment of goods valued at £135 or less is now subject to the VAT at point of sale. 

All merchants selling to the UK need to register for VAT

If you’re operating an online store (from outside the UK) that sells goods with a value of £135 or less directly to UK based customers, you will need to register for a VAT in the UK, and collect the VAT tax at checkout. See below for details on how to do this. 

Important steps for online sellers to take now 

It’s important that all online sellers doing business internationally be proactive in understanding any new liabilities so they are complying with the new rules.

It can be daunting but here are some simple steps you can take:

  1. Register for a UK VAT number: If you are selling goods with a value of £135 or less directly to UK based consumers (private individuals and non-VAT registered businesses), sign up for a UK VAT number at Register for VAT.
  2. Apply for an EORI: You need an Economic Operator Registration and Identification (EORI) number to move goods between the UK and non-EU countries. To apply, visit Get an EORI number
  3. Know your Commodity Codes: In order to charge the correct VAT rate, make sure your product descriptions are detailed and relate to a recognised Commodity Code. The correct VAT charge will have to be indicated on your invoice at the time of sale. Lookup Commodity Codes, duty and VAT rates at Gov.uk’s Trade Tariff page. 
  4. Practice good record keeping: Keep a record of the goods you sell and ensure you have the correct information to apply the correct VAT treatment. You can refer to UK VAT Record Keeping for details on how to stay up to date. 
  5. Selling to a UK VAT registered business: If you’re selling goods valued at £135 or less directly to UK VAT registered businesses, you need to obtain their VAT registration number and account for the VAT by means of a reverse charge. 
  6. Selling through a marketplace: For businesses selling goods through an online marketplace like eBay or Etsy, the online marketplace is required to register for UK VAT and to account for the VAT due on their VAT return. 
  7. Know the rules & talk with your accountant: Be sure to familiarise yourself with the official advice from the UK Government, and always consult a tax professional for issues related to taxes, duties, customs and other regulations. 

Additional resources

Gov.uk, Changes to VAT treatment of overseas goods sold to customers from 1 January 2021

Gov.uk, VAT: detailed information

Australian Department of Foreign Affairs and Trade, UK decision to leave the EU – Brexit

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