As an Amazon seller, you may have received a communication from the marketplace explaining changes to the VAT treatment of your supplies in the UK from 1 January 2021. This message from Amazon is in line with the upcoming changes to the VAT treatment of overseas goods sold to GB consumers, recently announced by the UK government. Ebay released a similar announcement back in September as all online marketplaces are affected by the changes.
If you are selling goods from overseas to GB consumers, then some of the below changes might affect the way you need to report VAT post-Brexit.
Abolition of the low value consignment relief
From 1 January 2021, the current £15 low value consignment relief will be removed, meaning that UK VAT would need to be invoiced on the supply of imported low value consignment. This is to place UK businesses on equal footing with non-UK retailers by ensuring VAT is charged on all supplies made to GB consumers.
Online marketplaces responsible for the VAT in certain cases
In certain situations, the responsibility to charge, collect and report UK VAT will be shifted from the seller to the marketplace as of 1 January 2021.
This will be the case when the marketplace facilitates a sale to GB consumers of goods imported in consignments with a value up to £135.
This means that as a seller, when you sell goods to UK consumers in consignments of less than £135, on a marketplace, and that the goods are outside of the UK at the time of the sale, the marketplace will be responsible for charging and collecting the UK VAT to the customer on your behalf.
However, when the intrinsic value of the consignments being imported exceeds £135, then the responsibility to charge, collect and remit UK VAT will remain with you.
Additionally, if as a non-UK seller you supply goods directly to GB customers without the involvement of a marketplace, and that your goods are located outside of the UK at the point of sale, then you will need to register for UK VAT if you are not already.
What to look for with these changes
From 1 January 2021, a few variables will affect the VAT treatment of the overseas goods you sell to GB consumers and you will be expected to determine who will be responsible for accounting for the GB VAT due on these sales.
The key questions you need to ask yourself include:
- Are your goods stored in the UK at the point of sale?
If your goods are located within the UK at the point of sale, and you are established in another country, then you should already be VAT registered in the UK.
- Are you selling on a marketplace or on your own website?
If, as a non-UK seller, you sell goods directly to GB consumers (e.g. on your own website), you will need to register for UK VAT from your first sale with no threshold applicable.
Alternatively, when selling the goods via a marketplace as a non-UK seller, the marketplace will be responsible for declaring the VAT on those sales after the goods have already been imported in the UK.
- Does the intrinsic value of your goods imported in consignment go above the custom duty threshold £135?
Sellers making sales of goods in consignment with a value up to £135 to GB consumers, where the goods are not located in the UK at the time of the sale, will need to charge UK VAT at checkout. If a marketplace is facilitating this sale, then the responsibility to charge and account for the VAT on this sale will move from the seller to the marketplace.
Upcoming measures in the EU
The measures being introduced by the UK government mirror a package of initiatives introduced across the EU from 1 July 2021, where the VAT liability will also move from the seller to the marketplace in certain cases. You can read more about these measures in our dedicated blog post.
As a seller, you should start preparing and make sure you understand what the VAT treatment of your sales to GB customers will be. Will you need to update your ERP system? Will your internal processes need adapting to reflect these changes? And, will you need to get a VAT number if you have not already?