Following the UK’s departure from the EU on 1 January 2021, there have been many changes to the VAT treatment for sales of goods to

customers in the UK. Full details of the guidance rules can be found here.

There are many variations to the rules which go beyond the purpose of this blog. We have summarized the main changes of the new rules for selling goods to UK consumers.

• For the goods imported to the UK in shipments not exceeding £135, the VAT will be collected at the point of sale (previously the point of import). That means the shipments are subject to the UK supply VAT rather than the import VAT.
• The Low-Value Consignment Relief (LVCR) has been abolished, which relieved import VAT on shipments of goods that were valued at £15 or less.
• This means the loophole that existed for sellers dropshipping low-value goods directly to UK customers from China and other countries has been closed. These sellers now have to collect VAT on sales.
• If a sale of goods is made through online marketplaces (OMPs) such as Amazon, eBay, Wish, the OMP will be responsible for collecting and accounting for the VAT.
• Additionally, if an overseas seller’s goods are already in the UK at the point of sale, the responsibility for accounting for VAT has also transferred from the overseas seller to the OMP that facilitates the sale. For example, if you use fulfillment by Amazon (FBA) and the goods are warehoused by them.
• Overseas sellers will remain responsible for accounting for the VAT on goods already in the UK and sold directly to UK consumers via their website without OMP involvement. In that case, the overseas seller will be required to register for the VAT at HMRC.
• Overseas business to business (B2B) sales to the UK companies not exceeding £135 in value will also be subject to the new rules. However, if the business customer is registered for VAT in the UK and provides its valid VAT registration number to the seller, the VAT will be accounted for by the customer through a reverse charge.

These new arrangements will apply to sales of goods to the UK customers where the consignment does not exceed £135 in value. That aligns with the threshold for relief from customs duty, thus minimizing the impact on customs procedures.

Consignments exceeding £135 will remain subject to existing customs rules and processes. The UK VAT registered businesses can postpone VAT accounting for their import VAT on the VAT return from 1 January 2021.

Please contact us if you would like any assistance with registering for UK VAT and the ongoing reporting requirements.