VAT and foreign goods sold to UK customers via trading platforms
How will online marketplaces handle VAT on goods from abroad that are sold to UK customers.

Goods sold before January 1, 2021
If you are selling goods to Northern Ireland from the EU or moving goods between Northern Ireland and the EU, different rules will apply.

Overview
From 23:00 on December 31, 2020 Shipments of goods valued £ 135 or less that are outside:

in the UK and sold via the online platform to customers in Great Britain (England, Scotland and Wales) will be subject to UK VAT on UK and EU point of sale supplies and sold via the online market to customers in Northern Ireland will be subject to VAT from import.
The £ 135 limit applies to the value of the entire imported shipment, not the separate value of individual items in the shipment.

Where these goods are sold through an online platform, the online sales platform will be subject to VAT, unless the goods are sold from Northern Ireland to a Northern Ireland customer where the seller remains liable for VAT.

Online trading platforms will also be required to pay VAT on goods of any value which are located in the UK at the point of sale and sold by a foreign company through the online trading platform.

These rules do not apply to import:

• shipments containing excise good – find out more about the import of excise goods to the UK from the EU from 1 January 2021.

• non-commercial goods (for example gifts) – learn more about taxes and duties related to gifts sent from abroad

  Seller remains liable for VAT on sales of goods in Northern Ireland sold to customers in Northern Ireland.

These rules also will not apply to shipments of goods from Jersey and Guernsey if VAT is collected and paid to HMRC as part of the Import VAT Accounting scheme.

What is the online marketplace?
HMRC’s definition of the internet market is a company that uses a website or mobile application (such as a marketplace, platform or portal) to support the sale of goods to customers that meets all of the following conditions:

• determines the terms of delivery of goods to the customer in any way

• is involved in any way in authorizing or facilitating customer payments

• takes part in the order or delivery of goods

A company will not be classified as an online trading platform if it only provides one of the following services:

• processing payments for the delivery of goods to the customer

• advertising goods

• redirecting or transferring customers to other websites or mobile applications where goods are offered for sale without further engaging in any sales that may take place on that website or application

Goods that are outside of UK at point of sale:

The online sales market has to calculate the consignment value of the goods by deciding on their ‘intrinsic value’, that is, the price at which the goods were sold, excluding:

• any shipping or insurance costs, unless they are included in the price and not separately invoiced

• any other identifiable taxes and charges

Unless they are shipped individually, the seller must add up the individual values for all items in the shipment to obtain the total value of the shipment.

If the seller changes the value of a shipment so that its total value exceeds £ 135, he may be liable for VAT and import duties, and adjustments to VAT already charged at the point of sale.

Low Value Shipment Exemption (LVCR), which is an import VAT exemption for goods with a value of £ 15 or less, has been removed in:

• Great Britain for goods imported from outside Great Britain

• Northern Ireland for Remote Order goods imported from outside the UK and EU

Shipments valued at £ 135 or less
The online merchant platform must collect and account VAT at the point of sale, unless a shipment is applicable business-to-business sales and the customer has provided his UK VAT registration number.

To charge and bill VAT, the online trading platform will need to

• Know the exact nature of the goods to checking the correct VAT rate for fees

• Register as a VAT payer – online marketplaces that are already VAT registered do not need to re-register

• keep records of goods sold and make sure they receive accurate information to properly settle the VAT on the goods

The online marketplace will be liable for underestimated VAT if it cannot show that it has taken reasonable steps to ensure that the correct VAT has been charged.

Business-to-business sales to UK VAT registered customers

The online trading platform will not have to collect and bill VAT if the customer provides them with their VAT registration number. The online store can confirm that it is correct by using the online service.

The online trading platform can add a note to the invoice (for example by writing “Reverse charge: customer settles VAT to HMRC”) and then send it to the UK business customer.

The business customer will then be responsible for settling the VAT due on his VAT return if the goods are delivered at:

• Great Britain using the “reverse charge” procedure

• Northern Ireland, taking advantage of the deferred VAT settlement

In both cases, the seller will be able to recover VAT as input tax on the same VAT return under the normal VAT refund rules.

Shipments over £ 135

Normal VAT and customs rules will apply to imports of goods into Great Britain from outside Great Britain or into Northern Ireland from outside Great Britain and EU.

Read VAT Tip 702 to learn more about how imported goods are treated for VAT purposes.

Goods that are in the UK at the point of sale.
Importing goods for sale on trading platforms.
The overseas seller will remain responsible for any import VAT and duties when goods are first imported into the UK.

When the goods are sold to the customer, the foreign seller is considered to have delivered the goods on the online platform at a zero zero rate. A foreign supplier does not have to invoice on the internet market for deliveries considered to be zero.

UK VAT will be charged at the point of sale.

The online trading platform will be required to account for VAT on sales made through it, unless the goods are intended for a business customer who provides them with his UK VAT registration number.

UK merchandise at point of sale going to Northern Ireland:
The online trading platform will not be subject to VAT on sales of goods located in Northern Ireland at the point of sale and sold to customers in Northern Ireland. The seller will be required to pay VAT.

Goods sold to companies registered for VAT in the UK:
The online trading platform should provide the seller on the platform with all the selling details (which should include the company’s VAT registration number). The seller will be obliged to settle VAT on sales.

If the goods are located in Northern Ireland at the point of sale and are sold to customers in Northern Ireland then the online trading platform does not need to provide the sales details.

VAT invoices:
Standard rules on the content and format of VAT invoices will apply.

The online trading platform should issue the full paper or digital invoice for the goods.

For goods sold in Northern Ireland from outside the EU, the online marketplace does not need to issue a VAT invoice.

VAT records
The online trading platform must keep full documentation (including VAT invoices) for 6 years from the date of sale of any goods.

VAT and foreign goods sold directly to UK customers
How sellers should account for VAT on overseas goods they sell directly to UK customers.

If you are selling goods to Northern Ireland from the EU or moving goods between Northern Ireland and the EU, different rules will apply.

From 23:00 on December 31, 2020 Shipments of goods valued £ 135 or less that are outside:

• in Great Britain and sold directly to customers (not via the marketplace) in Great Britain (England, Scotland and Wales) will be charged VAT on UK deliveries at the point of sale

• in UK and EU and sold directly to customers (not via the online marketplace) in Northern Ireland will be charged VAT on import

The £ 135 limit applies to the value of the entire imported shipment, not the separate value of individual items in the shipment.

These rules do not apply to import:

• shipments containing excise goods – find out more about the import of excise goods to the UK from the EU from 1 January 2021.

• non-commercial goods (for example, gifts) – learn more about taxes and duties related to gifts sent from abroad

These rules also will not apply to shipments of goods from Jersey and Guernsey if VAT is collected and paid to HMRC as part of the Import VAT Accounting scheme.

Goods that are outside of UK at point of sale

The seller must calculate the consignment value of the goods by deciding their ‘intrinsic value’, this is the price for which the goods were sold, excluding:

• any shipping or insurance costs, unless they are included in the price and not separately invoiced

• any other identifiable taxes and charges

Unless they are shipped individually, the seller must add up the individual values for all items in the shipment to obtain the total value of the shipment. 

If a seller changes the value of a shipment so that its total value exceeds £ 135, the seller may be required to pay VAT and import duties and adjustments to VAT already charged at the point of sale.

Low Value Shipment Exemption (LVCR), which is an import VAT exemption for goods with a value of £ 15 or less, has been removed in:

• Great Britain for goods imported from outside Great Britain

• Northern Ireland for Remote Order goods imported from outside the UK and EU

Shipments valued at £ 135 or less

The seller must charge and account for VAT at the point of sale, unless the shipment is a business-to-business sale and the customer has provided it with a UK VAT registration number.

To charge and account for VAT, the seller will need to:

• know the exact nature of the goods to checking the correct VAT rate for fees

• Register as a VAT payer – sellers who are already VAT registered do not need to re-register

• keep records of the goods sold and make sure they receive accurate information to apply the correct VAT to them

For goods shipped to Northern Ireland from outside the UK and EU, the Low Value Shipment exemption will no longer apply and the seller will be required to settle VAT on the VAT return instead of at the border.

Business to Business Sales to UK VAT Registered Customers:

The seller will not have to charge and account for VAT if the customer provides him with his VAT registration number. The seller can confirm correctness using the online service.

The seller can add a note to the invoice (for example, by writing “Reverse charge: customer settles VAT to HMRC”) and then send it to the UK business customer.

The business customer will then be responsible for accounting for the VAT due on his VAT return if the goods are delivered to:

• Great Britain using the “reverse charge” procedure

• Northern Ireland using deferred VAT

In both cases, the seller will be able to recover VAT as input tax on the same VAT return under the normal VAT refund rules.

Sellers do not need to register for VAT if they sell goods that are outside of the UK at the point of sale to UK registered companies.

Shipments over £ 135
Normal VAT and customs rules will apply to imports of goods into the UK from outside the UK or into Northern Ireland from outside the UK and EU.

Read VAT Tip 702 to learn more about how imported goods are treated for VAT.

Goods that are in the UK at the point of sale:
If you are a foreign seller who has goods of any value that are located in the UK at the point of sale, you must register for and account for VAT on any sales made directly to customers in the UK or Northern Ireland.

If you import goods and then sell them through the online marketplace, different rules apply.

VAT invoices
Standard rules on the content and format of VAT invoices will apply.

The seller should issue a full paper or digital invoice for the goods.

For goods sold in Northern Ireland from outside the EU, the seller does not need to issue a VAT invoice.

VAT records
The seller must keep full documentation (including VAT invoices) for 6 years from the date of sale of the goods.

Lump sum scheme
Sellers who use the flat rate scheme must decide if they want to stay in the program from 1 January 2021.

Any sales transactions made by the seller through the online trading platform where the trading platform is obligated to account for VAT will not be included in the calculation of the flat rate system from January 1, 2021.

Sellers who choose to remain in the program will continue to be subject to its terms, including restrictions on VAT recovery.

The seller may decide to leave the program at any time.