Online sellers and worried about VAT?
HMRC have issued new requirement on 5 October 2020 regarding the VAT treatment and registration. Online sellers and market places must follow the new requirement from 1 January 2021.
The overseas sellers will be required to register and account for the VAT to HMRC. This will be applicable even if the goods are sent from overseas directly to UK consumers. This is in addition to the current requirement where the goods are stocked in the UK prior to sales.
For VAT purposes, a supply will be deemed to be made. Even if the goods are located outside the UK at the point of sale. In other words that sale is liable to UK VAT.
These new arrangements will apply from 1 January 2020 to consignment that does not exceed £135 in value.
The selling price will determine the VATable value of the goods.
The new arrangements will apply irrespective of where the business selling the goods is established.
This means that the following types of businesses will have to register for UK VAT (if not already registered) and account for VAT to HMRC:
- any business that operates an online market place that facilitates sales of goods to UK customers
- any business that sells goods directly to UK customers where the goods are (a) outside UK at the point of sale (b) imported to the UK in consignments not exceeding £135 in value
Note that businesses established outside the UK and selling goods to UK customers where the goods are already in the UK at the point of sale are liable for UK VAT on those sales under existing rules. Such businesses should already be VAT registered. A common example is Amazon FBA UK sellers.
Goods with price/value more than £135
The value should be based on the ‘intrinsic value’ of the goods, which equates to the price at which the goods are sold, excluding:
- transport and insurance costs, unless they are included in the price and not separately indicated on the invoice
- any other taxes and charges identifiable by the customs authorities from any relevant documents
It is important to bear in mind that the £135 threshold applies to the value of the consignment, not to each individual item within the consignment.
To determine the correct VAT treatment you will need to know whether the goods are to be packaged and sent singularly to the customer or as part of a consignment with other goods.
If the latter applies then it is the overall value of the consignment that must be considered
If this is over £135 then normal VAT and customs rules will apply, meaning that import VAT will be chargeable. Therefore, supply VAT should not be charged at the point of sale.
Further guidance can be read here
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