Following the end of the transition period and the new rules from 1 January 2021, non-UK sellers (both from the EU and worldwide) may be required to register and account for UK VAT on sales to non-business customers in the UK, i.e. “B2C” sales.
There is a lot of talk in the media at the moment in relation to online sellers refusing to sell to UK non-business customers from 1 January 2021 and so we have summarised the details here.
In order to consider the impact of the new arrangements, it is useful to remind ourselves of the arrangements pre 1 January 2021. The summary below covers direct sales to non-business customers and not sales via an online marketplace.
Pre 1 January 2021
For EU sellers (outside the UK) of stock located in another EU country there were the following options:
- Account for local VAT based on the supplier’s home country requirements and monitor annual sales to UK non-business customers to determine if a UK VAT registration was required under the “distance selling” rules (the threshold was £70k annual sales to the UK).
- Once the annual threshold of £70k was breached, the seller had an obligation to register for UK VAT and account for UK VAT on sales to UK non-business customers.
- Voluntarily register for UK VAT irrespective of the level of sales and account for UK VAT.
As goods moved within the single market, there were no additional checks on the goods as they arrived in the UK. The above “distance selling” rule is an EU simplification measure and no longer applies in the UK post 31 December 2020.
If the seller was responsible for importing the goods into the UK, the seller was liable to pay any related import VAT and customs duties. A “low value consignment” relief applied for imports of a value less than £15 where no VAT and duty was payable.
Post 1 January 2021
In the post EU exit world, as distance selling no longer applies the following new arrangements need to be considered. As Great Britain is no longer part of the EU single market, the rules for imports into the UK will apply. Please note that Northern Ireland is still a part of the EU for goods purposes and so the original rules still apply to shipments by EU vendors with goods located outside the UK to non-business customers in Northern Ireland.
If you are already VAT registered in the UK due to previous distance selling to UK non-business customers then this UK VAT registration will still be valid and we have not had any indication from HMRC that these VAT registrations need to be amended.
In addition to the EU exit changes, HMRC have brought in new rules for imports over and under £135 at the same time which has been causing some confusion for businesses. Please note that the VAT registration threshold does not apply to non-UK based sellers so any sale can require a UK VAT registration irrespective of value.
The new arrangements will depend on the delivery terms in place but, in summary, there are the following options:
1. Direct sales – Customer imports.
- The non-business customer is the importer of the goods into GB and will be responsible for any import VAT and customs duties for imports over £135.
- If under £135, the goods are imported without import VAT and customs duty but the seller is still responsible to register and account for UK VAT on the final GB sales at the equivalent rate for the goods sold i.e. if the goods are normally at the standard rate 20% VAT must be accounted for to HMRC.
- If the value is over £135, the customer will be liable to settle the import duties and import VAT in order to receive the goods. Whilst this absolves the seller of registering for UK VAT for these sales, there may be a negative customer experience in having to settle any import taxes before the goods can be received and this could impact on the likelihood of future purchases.
2. Direct sales – Supplier imports.
- Where the seller is responsible for delivery of the goods to the non-business customer and settling any taxes due, the seller will need to be named as the importer of record of the goods.
- Although there will still be no import VAT and duties if the value is less than £135, the seller will be responsible for registering and accounting for VAT on the final sale through a UK VAT return as per the above, irrespective of sales values.
- If the value of the goods is over £135, the seller will be responsible for settling the import duties (although the import VAT may be covered by postponed VAT accounting and reported and recovered on the VAT return where a VAT registration is already in place). The seller will need to register for UK VAT in order to account for the VAT on the sale and also declare and recover the import VAT. The seller will need to consider the requirements for a GB EORI to quote on import and also arrange with the freight forwarder how any import duties will be paid. We are aware of an issue with some freight forwarders refusing to act for non UK established entities where the delivery terms are DDP (delivered duty paid) and so we would recommend a discussion with your freight forwarder on the practicalities on how they can assist here.
3. Direct sales – via online marketplace.
- If you are selling through an online marketplace the marketplace may be liable to account for the UK VAT and so we would recommend that you confirm the arrangements with them.
How we can help
Should your require any further details or require support in relation to a UK VAT registration or ongoing VAT and import obligations, please get in touch via the button below.
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