Consignments that are valued over £135
Consignments that are valued below £135
OMP (Online Marketplaces) Supplies
Business-to-Business Shipments
Treatment of VAT on import in the declaration
Deliveries to and from Northern Ireland
General Services
Digital Services
Consignments that are valued over £135 and are delivered to the UK from outside the UK will now be levies an import VAT at the UK border.
• This VAT will be reported in the UK VAT Return. This is the case if the VAT-registered importer is using Delayed supplementary declaration or Simplified Customs Declaration.
• If a UK VAT-registered importer does not use Simplified Customs Declaration process or they use the delayed supplementary customs declarations, they could account for any Import VAT. They can do this on their regular VAT returns. However, they must use postponed VAT accounting.
• A non-UK VAT registered importer or UK registered importer who is not using postponed accounting, will be required to pay import VAT. This will be done as part of the customs process. In such cases, VAT payments will be deferred and will be done using Duty Deferment account.
Consignments that are valued below £135 and delivered from outside the UK.
• Such consignment will not be levied import VAT.
• Such consignment will be subject to customs declaration for non-fiscal purposes.
• The supply of such goods will now be treated as if taken place in the UK.
• UK VAT will be chargeable on such goods.
• Low-Value Consignments relief has been abolished for goods with value not exceeding £15.
The above rules should be applied to all goods with time of suppler on or after 1st of January 2021.
Exceptions to this above:
OMP (Online Market Places such as Amazon, eBay etc) will have to collect and account for UK VAT regardless of the value of goods or where they were when they were sold.
If the buyer is a VAT-registered person with UK VAT number. In such case any non-UK seller will be required to:
– Register for VAT
– Account for VAT to HMRC on all sales
Any time a direct seller makes sales in the UK, they need to have a UK VAT registration. This applies to goods that are not in the UK at the time of sale and are imported consignments that are below £135.
Distance selling has been abolished.
Minimum turnover registration threshold has been abolished.
Conclusion: Any non-UK business selling goods that are inside the UK at the time of sale are liable for UK VAT and need to be VAT registered.
OMP (Online Marketplaces) Supplies
From the 1st of January 2021, all sales from non-UK sellers facilitated by an OMP need to be classed as supply of goods that are in the UK. In this case OMP should be classed as a seller rather than the non-UK seller whose goods are sold.
This means that OMP will be the one who will collect and account for VAT in the UK not the seller.
In this case:
• OMP is considered as a supplier.
• Non-UK seller is no longer a supplier.
• When the goods are in the UK they will be classed as zero-rated supply to OMP for VAT purposes
The Above will apply if the value of the goods sold does not exceed £135 or delivered from a location in the UK.
The non-UK seller will need to register for UK VAT to be able to recover import VAT on all consignments exceeding the value of £135.
There are two ways the supply can be treated:
If OMP is not facilitating the sale, the supply is considered as though taken place in the UK from the seller to the consumer directly and liability for UK VAT should be assumed.
If OMP is facilitating the sale, the seller is assumed to supply to the consumer in the UK. The seller will need to account for VAT.
The value of goods is now based on the price that they are sold not the value calculated when they are imported. This is regardless whether the OMP is facilitating or not.
Goods that are outside of the UK at the point of sale
In the situation when the goods are located outside the UK when they are sold, the seller making sales in the UK needs to register for UK VAT and account for UK VAT to HMRC. This will apply in the following cases:
– Any business with an OMP that facilities the sale of goods to their UK customers
– Any business located outside the UK without an OMP that sells directly to UK customers with consignments not exceeding £135.
– Any business located outside the UK and selling goods to UK customers where goods are in the UK at the point of sale are no longer liable for UK VAT. They will not need to register for VAT.
If the goods are located in the UK, and the sale is business-to-business, the OMP’s VAT liability will not arise. In this situation the consumer will need to provide their UK VAT registration number. If the UK VAT registration number will not be provided, the sale will be classed as business-to-consumer.
If there is a valid VAT number, the supply is deemed to be coming from an overseas seller. The goods will be sent to the recipient (business) and the existing VAT rules will apply. No VAT reverse charge will apply.
OMPs are now required to advise each overseas seller that they need to account for VAT. This is in case the business provides the buyer with a valid UK VAT number.
From 1st of January 2021 all OMPs are obliged to calculate and withhold UK VAT on sales that are made through OMPs.
This has come as additional requirement to the rules introduced in earlier years which allowed HMRC to:
– Hold OMPs liable for VAT due from overseas sellers selling their goods in the UK.
– Insist that OMPs check and display the VAT details of the overseas sellers.
All non-established sellers making sales in the UK and holding their stock in the UK:
– Are liable to register and account for UK VAT from the fist time they make sale to UK customers or begin to hold stock in the UK.
There is no VAT registration threshold for non-established sellers, they should account for VAT as soon as the first sale is made.
Business-to-Business Shipments
The above rules do not apply if the supply is B2B and the goods are located in the UK when they are sold. OMPs are not liable for VAT in this case.
A valid UK VAT number should be provided, and the seller should be advised to calculate the VAT on the sale.
A UK business customer who is located in the UK can receive the goods that they have purchases under the VAT reverse-charge mechanism. This is how it was for intra-Community acquisitions.
The following conditions now apply:
The customer located in the UK is an entrepreneur and they are registered for VAT in the UK.
The customer located in the UK has given the foreign seller a valid VAT number.
The invoice that was issued by the foreign seller contains a reference to the reverse-charge mechanism. In cases such as this, the non-UK seller (or the OMP) won’t be liable to account for any UK VAT that is due.
If a VAT number is provided, the supply of goods will now be considered to have been provided by the non-UK seller rather than the OMP. In cases such as this, normal VAT rules will apply. The OMP will be required to quickly notify the non-UK seller that they are a direct seller. This means they will need to account for UK VAT.
If a VAT registration number is not given the OMP will need to treat the supply of goods as
a business-to-consumer (B2C) transaction. It will be treated as if the supply was made by the seller and they will now be responsible for accounting for VAT.
Treatment of VAT on import in the Declaration
From 1st of January, all goods shipped from Europe will be classed as imports. VAT on imports will have to be declared through VAT returns by means of the reverse charge mechanism. When the reverse charge is applied on imports, the following will take place:
– The imported goods should be intended for use in the business of the entrepreneur.
– The importer should have their UK EORI number starting with GB on the customs declaration.
For regular importers there is always the option to have DDA. This allows them to pay their customs duties, excise duties and import VAT once a month on direct debit instead of paying for each individual shipment.
Deliveries to and from Northern Ireland
All deliveries to and from Northern Ireland (NI) now are made according to a special temporary protocol. The protocol will take effect from the 1st of January 2021 and will be subject to a regular review.
HMRC will be responsible to collection of EU VAT and excise duties in NI. NI companies will receive special VAT identification numbers beginning with XI and XU. This will make it easier to classify transactions between EU and NI according to the existing EU VAT regulation. NI companies will need to provide their trading partners with an EU identification number.
Below are some situations applicable to trading with NI based on the new protocol:
Cross boarder services between NO, GB and EU are not part of the NI protocol and are treated as any other between EU and a third country.
General Services
General Services between the UK and EU are outside the scope of VAT and the rules apply as with other third country. Services to individuals in the EU will not be taxed unless they are digital. For digital services, VAT should be taxed according to the rules of the EU country where they are provided.
The following concepts will apply:
– If the service is from EU seller to UK customer B2B: no VAT, outside the scope.
– If the service is from EU seller to UK customer B2C: no VAT, outside the scope unless digital.
– If the service is from UK seller to EU customer B2B: no VAT, reserve charge by EU business.
– If the service is from UK seller to EU customer B2C: EU VAT applies via Union-Union OSS
Digital Services
UK service providers will be required to fill in a single MOSS registration in any EU country.
EU digital service providers in the UK will need to have a UK VAT registration and report VAT via a regular VAT return filing.
The threshold of 10,000 Euros for cross-border digital services in the EU will no longer apply.