UK VAT: import changes to ecommerce

This includes making facilitating marketplaces liable for the VAT collections for their overseas sellers. The EU was due to implement a similar ecommerce VAT package but has delayed those plans until 1 July 2021 due to the COVID-19 outbreak. Read on to find out about the UK VAT B2C ecommerce and marketplace reforms.

VAT UK – B2C ecommerce and marketplace reforms include:

1. All imported goods purchased are subject to UK VAT – this has meant the abolition of the Low Value Consignment Stock relief that was previously available on items of less than £15.
2. Imported consignments of goods not exceeding £135 are subject to sales (supply) VAT instead of import VAT. This should be charged to the UK customer by the seller (whether that be a UK or overseas business) at the point at which the customer completes the sale on the business’s website. The seller must then collect VAT from their customer and report via a standard UK quarterly VAT return. Goods above this value will be subject to VAT and customs using the old rules.
3. If an online marketplace (OMP) facilitated an import sale not exceeding £135, it is the marketplace that becomes responsible for charging VAT to their customer and reporting VAT on a local return. Furthermore, should the goods already be in the UK at the point of sale and it is a non-UK business making that sale, any OMP facilitating this sale, regardless of its value, will be responsible for the VAT obligations.

Further details of the second of these two reforms can be found below.

B2C Sale of Goods – located outside the UK at the time of the sale

Imports less than £135

Imported goods consignments, regardless of whether these are made up of multiple goods in a single consignment or simply one item, not exceeding £135 are subject to a new VAT regime.

No longer will import VAT on such items be applied (meaning that the import duty and import VAT thresholds are now aligned) or collected at clearance by Customs, but rather both UK and non-UK resident sellers must charge sales VAT though their website checkout.

Should the business be operating through a facilitating OMP, the OMP should charge the VAT to the end customer in their name as the ‘deemed’ supplier. Whoever’s responsibility it is to make the sale, that company must provide a valid VAT invoice which should accompany the consignment through customs.

If not already registered, the business should register for VAT and pay the VAT collected to HMRC via a regular UK VAT return. The business should mark the goods as ‘VAT paid’ on the Customs declaration to avoid double import taxation at the border by Customs.

The £135 threshold is based on the intrinsic value of the goods, which excludes separate transport insurance or other import taxes.

Imports greater than £135

When importing goods above £135, or consignments of multiple goods with a combined intrinsic value above £135, businesses can continue to use their old import VAT procedures. This means the seller may pay the import VAT (and duties) on clearance and reclaim if they are already VAT registered and have a UK VAT number. Equally, the seller may opt to have their customer pay the import VAT and duty at Customs or to the delivery agent, although that may result in an unsatisfactory customer experience.

B2C Sale of Goods – located inside the UK at the time of the B2C sale

Non-UK seller operating via OMP

When a non-UK seller sells goods to consumers, via a facilitating OMP, that have already been imported into the UK (e.g., stored in a UK warehouse) prior to the sale, then under the new rules the OMP becomes the deemed supplier, regardless of the value of the sale.

The seller will have already paid VAT in one of two ways. Firstly, the seller will have paid import VAT and any duties to clear the goods into the UK, should they have purchased these from an overseas supplier, or shipped them from their overseas headquarters. Alternatively, they could have simply paid input VAT if the goods were purchased domestically. In either scenario, this is reclaimable through a UK VAT return.

Under the new rules, the non-UK seller will first sell the goods as a zero-rated supply to the OMP. This will be declared in their UK VAT return in box 6. The OMP will then sell to the consumer at regular UK VAT rates.

B2B transactions are excluded and a UK VAT number will serve as evidence. Normal UK VAT will apply.

Non-UK seller operating on own website

Where there is no facilitating OMP in the transaction, the old rules will apply. The non-UK seller must be UK VAT registered and charge UK VAT to businesses or consumers.

UK seller operating via OMP or own website

The old rules will apply and VAT will be charged to UK businesses and consumers.

What is a Facilitating Online Marketplace (OMP) in relation to the new rules?

OMPs are electronic interfaces (website or mobile applications) such as a marketplace, platform, portal or similar that facilitates the sale of goods to customers. ‘Facilitating’ shall mean where any of the following conditions are met by the OMP:

1. it sets the general terms and conditions of the sale;
2. it authorises the charge to the customer for payment; and
3. it is involved in ordering or delivering the goods.

It will not be regarded as an OMP if a business only provides one of the following:

• the processing of payments in relation to the supply of goods;
• the listing or advertising of goods;
• the redirecting or transferring of customers to other electronic interfaces where goods are offered for sale, without any further involvement in the supply.