UK E-commerce B2C Imports and VAT in 2021
Her Majesty’s Revenue and Customs (HMRC) recently changed the Import VAT on any products that were sold via e-commerce. The rules for sellers and marketplaces changed on the 1st of January 2021. This change also has resulted in VAT collections as far as overseas sellers are concerned. In other words, they are liable for VAT collections for their overseas sellers. This is a result of the UK leaving the EU Vat regime. The EU is considering using the very same VAT package from July 2021.
The reforms will include:
– All imported goods that have been purchased are now subject to VAT. This puts the £15 exemption threshold to an end.
– Imported consignments of goods that do not exceed £135 will now be subject to sales VAT as opposed to import VAT. This will need to be charged to the consumer in the UK or the non-UK seller. The charge will take place at the point of sale. The seller will then be required to report the sale has taken place, in addition to paying the VAT. They will need to do this using a regular VAT return.
– Any online marketplace that facilitates an import sale that does not exceed £135 will have to charge and report VAT. The online marketplace is also responsible for the sale of any value by non-UK sellers. This is when the goods are already in the UK.
1. Goods That Are Outside the UK When They are Sold
– Imports that do not exceed £135
Imported consignments of goods, including multiple goods in a single package that passes through UK customs, are now subject to a brand new VAT regime. This regime now replaces the current import VAT collection at customs or the import payments made to the delivery agent.
For transactions such as these, any non-UK resident and UK resident sellers will now be required to charge sales VAT. They need to do this through their website checkout.
If your sales are made through a facilitating online marketplace (OMP), the marketplace will need to charge their VAT in their own name as they are deemed to be the supplier. The VAT will now be calculated on the sales price. The online marketplace or the seller will now be required to provide a VAT invoice. This invoice (Which can be simplified) will have to be sent with the consignment through customs.
The VAT will be paid using a regular VAT return by the online marketplace or the seller. The goods being sold will need to be markeв as VAT paid at checkout. This is so that the seller can avoid double the amount of import taxation at the border.
The threshold of £135 is based on the goods’ intrinsic value. This does not include the separate transport costs or the insurance associated with import taxes. In addition to this, the £135 threshold is also the exemption threshold used by UK customs.
If the customer happens to be a UK VAT-registered business they can give the OMP or the seller their VAT number. This will allow for zero-rating. The customer can then use the reverse charge mechanism. This is so that they can report the VAT that is due. If this does not take place, VAT will have to be charged.
Gifts that are worth no more than £39 and excise goods of the same value are not included in the new regime.
– Imports that exceed £135
Any import goods that are higher than £135 in value and consignments of multiple gods that have a combined value of more than £135 can use the old VAT import procedures. What this means is that the seller can choose to pay the import VAT and the duties on clearance. The seller can also reclaim if they already have a UK VAT number. Additionally, the seller can also choose to ask their customer to pay the fee to the delivery agent or at customs.
2. Goods That Are Inside the UK When They are Sold
– Non-UK seller operating via an online marketplace
When a seller who is not in the UK sells to consumers using a facilitating OMP, the goods already in the UK before the sale means that the OMP is considered to be the supplier. This takes place regardless of the goods’ value. These considerations do not apply to any UK-resident sellers.
The seller has already paid the import VAT. They have also paid duties to clear the goods. This is so that the goods are cleared into the UK before they are sold. Alternatively, the seller can pay the input VAT if the goods that are sold were originally purchased domestically. In both of these cases, the VAT will be reclaimed using a UK VAT-return.
– Non-UK seller operating via their own website
If there is no facilitating online marketplace (OMP) in the transaction, all of the old rules will still apply. What this means is that the non-UK seller will need to be VAT-registered. They will also need to charge UK VAT to the consumers or businesses.
3. Facilitating the OMP (Online Marketplace)
– What exactly is a facilitating online marketplace (OMP)?
All online marketplaces are what is known as “Electronic interfaces”. This means they are either a website or a mobile application. The OMP can be a marketplace or they can be a portal, a platform, or anything similar which helps to facilitate the sale of any goods to their customers. Where the word “Facilitating” is used, it means any of the conditions below are met:
- Sets the sales’ terms and conditions.
- Authorises either the charge or the payment to the customer and
- Is involved in delivering or ordering the goods.
A business is not considered to be an OMP if it only provides one of the following:
- Payment processing when the supply of goods has taken place.
- The advertising or listing of any goods.
- Transferring or redirecting customers to other electronic interfaces. This is where goods are sold and the business does not have any other intervention in the goods’ supply.
– Requirements that OMP’s need for determining VAT
Now OMP’s are required to charge VAT and collect VAT, they need to ensure they have the correct data so they can make the right calculations. These data include:
- Ship from country, this is where the seller’s goods where when the sale took place.
- If the goods are in the UK, and whether the seller of those goods is a non-UK resident.
- If the goods are imported, the goods’ intrinsic value is required if the consignment does not exceed £135.
- The nature of the goods. This is so they can determine the correct standard, the zero-rated, or reduced VAT treatment.
- If the customer is a VAT-registered business that is entitled to Zero-rating. This is on goods that have been imported and don’t exceed £135. If the seller is making a non-UK domestic sale, this is not to be deemed as the supplier transaction. This is with regards to a sale of any value.
– VAT liabilities for OMP’s
Online marketplaces could be held liable for any under-declared Vat on any of the deemed supplier transactions. This is why it is essential that OMP’s ensure that the information they receive is completely accurate.
All online marketplaces will need to take reasonable steps that are within their power to always ensure that the correct VAT and the correct amount of VAT is charged. OMP’s will also be expected to carry out proportionate and reasonable due diligence. They will need to take into consideration all of the information that is available to them when calculating the correct VAT.
– OMP Record Keeping
All online marketplaces need to retain any electronic records that support all of their transactions. The records must be kept for at least 6 years. This period of time covers the transactions where:
The OMP has been the facilitating deemed supplier and where the seller was responsible for the VAT.