By Sean O’Sullivan
What is an “online marketplace”?
If you are non-UK resident, international supplier of goods and you sell those goods through your website or mobile app and that website or app:
- sets out terms and conditions relating to how goods are supplied to the customer;
- authorises or facilitates customers’ payments; and
- is involved in the ordering or delivery of the goods
then for UK VAT purposes, the website or app will be classed as an online marketplace and certain rules apply to your UK sales.
Are all businesses selling goods online considered online marketplaces?
It is important to note that your business may not be considered to be an online marketplace if it is only involved in:
- processing payments for the supply of the goods;
- advertising or listing the goods; or
- redirecting or transferring customers to third party websites or apps where the customer goes on to buy the goods (as long as your business has no further involvement in the sale).
Goods stored in the UK and sold on an online marketplace?
Whenever an overseas supplier is selling goods in the UK, there is a presumption a UK VAT registration will be required. If those sales are made via an online marketplace, that online marketplace must be VAT registered.
Where you (as the overseas supplier in this scenario) maintain an inventory of goods in the UK that are sold on an online marketplace, you will need to pay any import VAT and Customs Duty on the import.
Selling direct to consumers
If your UK customers are consumers or not VAT registered, sales are deemed by the UK tax authorities as being made by the online marketplace and it is assumed the online marketplace will charge the customer the appropriate VAT.
You will have made a ‘zero-rated’ supply to the online marketplace for the goods. This zero-rated supply means your overseas business can register for UK VAT and reclaim input VAT.
Selling to other businesses
If your UK customers are other businesses, sales will usually be considered to be made by you, the overseas supplier, and not the online marketplace.
In this scenario, your overseas business must be registered for VAT and should charge VAT at the appropriate rate on each sale.
Goods stored outside of the UK and are sold on an online marketplace?
Selling direct to consumers – under £135
If your UK customers are consumers or not VAT registered and the price of the sale is below £135, the sale is deemed to be made by the online marketplace, for which VAT (known as “supply VAT”) should be charged by the marketplace to the customer.
Selling to other businesses – under £135
If your customers are VAT registered and sales are below £135, then your buyers will need to apply the ‘reverse charge’ to the supply.
Selling to business or consumers – over £135
If the value of goods is greater than £135, then whether your buyers are VAT registered or not, import VAT is payable by the customer when the goods reach the UK border, providing your customers are listed as the importer of record.
UK sellers that sell goods from the UK on an online marketplace
If you are a UK seller of goods which are sold online to UK customers, then you will need to consider whether you make enough sales to go over the VAT registration threshold. If so, a VAT registration is required and UK VAT will need to be charged on sales.
Non-UK or EU customers
If the goods are sold from the UK and then shipped outside of the UK and outside of the EU, then provided you can evidence that the goods are being exported from the UK, zero-rate VAT applies.
If the goods are sold from the UK and shipped to customers in the EU, then it starts to get complicated!
Supplies will be subject to local VAT and Customs Duty in the EU member state, although there is a duty exception for consignments under €150.
When the consignment is valued at greater than €150, the “Importer of Record” will be important and the UK supplier may need to handle “destination VAT” and require a VAT registration in the destination state.
We often find UK suppliers of goods choose to register for VAT in their customer’s country and charge the appropriate local VAT. This has a huge benefit – customers don’t receive demands from local customs authorities for customs duties.
Import One Stop Shop
If you are selling goods online to customers in the EU, you should ask us about the ‘Import One Stop Shop’ (IOSS). This is the implementation of a single monthly return, without the need for multiple VAT registrations across EU member states, minimising your compliance needs.
In some circumstances, online marketplaces will be liable to account for VAT on a supply made by a user of the marketplace, so you should always consult a tax advisor before making any EU VAT registration applications.
What if I should have registered already?
If you were not aware of your VAT obligations in the UK or in relation to other countries in Europe, then you may be liable for a late registration penalty and for any VAT underdeclared. Interest may also be chargeable. The sooner you speak to someone to establish your liabilities, the sooner any obligations can be dealt with.
How ZEDRA can help
Our team of UK and EU VAT experts help companies of all sizes to manage their VAT, corporate tax and associated affairs. If you are a seller of goods online, contact Sean O’Sullivan for advice.