The UK has implemented its e-commerce VAT reforms for online sellers and marketplaces (OMP) on 1 January 2021. This changes the rules on import VAT for e-commerce, and makes marketplaces liable for the UK VAT obligations of their third-party sellers. This will mean UK VAT registration for many more overseas sellers and marketplaces.
These are similar to the EU e-commerce VAT package scheduled for 1 July 2021. Northern Ireland ecommerce VAT rules are different following Brexit. VAT Calc’s in real-time global Calculator and Auditor services produce instant and accurate UK calculations into your ERP or e-commerce system for compliance with the 2021 UK ecommerce changes. Our VAT Filer, sharing the same platform and transaction data, can then accurately complete UK filings.
Key e-commerce UK VAT changes on 1 Jan 2021?
The UK implemented two major changes to its VAT requirements for sellers and marketplaces:
B2C Sales of goods located outside of the UK at the time of sale:
- Withdrawal of the old £15 import VAT exemption on imported goods being sold to UK consumers
- Imposition of requirement on sellers or any facilitating marketplace to charge UK output VAT in the checkout for import consignments with an intrinsic value not exceeding £135. The would mean VAT is charged and collected in the checkout rather than at customs as previously.
- If a facilitating marketplace (see below) was involved on the sale of this transaction, then it would be responsible for the UK VAT as the deemed supplier. This would mean buying the goods from the seller at zero VAT, and then charging UK VAT to the UK consumer.
- Any consignments exceeding £135 would be subject to UK import VAT at customs as before.
- As a result of the above changes, the following sellers or deemed seller marketplace will now have to UK VAT register to report the output VAT on consignments below £135:
- Overseas sellers selling from stocks located outside of the UK directly to UK customers
- Overseas marketplaces (OMP) that facilitates sales by any seller (UK or oversead) of goods located outside the UK at the time of sale.
B2C sales of goods located in the UK at the point of sale by overseas sellers or marketplaces
A non-UK overseas merchant sells goods directly or via an OMP of any value to a UK consumer when the goods were already located in the UK before the sale. UK VAT and any duties will already have been paid at the time of importation. UK VAT will be due on this domestic sale to the UK consumer; this represents no change.
However, if a UK or non-resident online marketplace (OMP) facilitated the sale, then they take on the UK VAT obligations of the overseas seller. The following two transactions are effected to achieve this:
- Overseas seller sales goods to OMP at zero rate VAT, with right to deduct. The overseas seller will likely already be UK VAT registered since they have imported or bought the goods originally in the UK, which is a VAT transaction.
- Facilitating OMP then sells the goods to the UK consumer with regular UK VAT charge. This will require the OMP to be UK VAT registered if they are not already. There is no VAT registration threshold in the UK for non-residents.