There is a new VAT rule for overseas sellers in the UK. These rules depend on a few factors:
• Whether the products are inside or outside the UK during the time of supply.
• Whether the goods you sell cost more than £135 or not.
• Whether it’s a B2B or B2C sale.
• Whether you are selling via an Online Market Place (OMP).
New VAT rules
Here are some of the rules that overseas sellers must follow from 1st January 2021 if they want to sell their products in the UK.
1. Direct sales by overseas sellers with goods outside UK at the time of sale
B2C sales less than £135 – Overseas sellers should charge UK VAT from UK customers at the point of sale. They should also follow the ongoing VAT obligations, such as VAT payments, VAT returns, and VAT invoicing. Overseas sellers don’t have a minimum VAT registration threshold for this case. However, sellers must apply for VAT registration if they make sales to UK customers after 1st January 2021. If you run an EU business and already have UK VAT registration, you don’t need to do anything.
B2B sales less than £135 – You may not charge VAT if you have your business customer’s VAT registration number. However, you should issue a VAT invoice with a notation that says the UK business customer should account for VAT by reverse change.
B2B sales more than £135 – As an overseas seller, you may not account for UK VAT if your Northern Ireland or GB EORI number of your business customer comes in the customs declaration as the consignee. You should issue a VAT invoice with your customer’s VAT number with a notation of accounting the business for VAT by reverse change.
2. Sale by overseas sellers via Online Market Place
B2C sales using OMP – The UK government will consider your trade as a B2B supply if you sell via OMP. It will be eligible for VAT registration so that you can recover the VAT amount you incurred but were not responsible for on the sale during VAT return. Your sale will become a B2C supply only to the customer so that you can file VAT returns for collection and payment of your share of VAT. The OMP, though, has to register for VAT and issue a respective invoice to your customer.
B2B sales using OMP – You can account for VAT and also issue a VAT invoice if you get the details of your business customer’s UK VAT number. What if you don’t have the VAT number of your business customer? In that case, your sale will be considered as a B2C supply via OMP instead of B2B sale. Like the previous situation, your OMP will become the supplier and should account for the VAT and issue VAT invoices to your business customers.
3. Sales by overseas sellers using OMP with goods outside the UK at the time of sale
B2C sales less than £135 – Your sale will be considered as B2B supply to your OMP and won’t come under the recent VAT regulations. This means you won’t need to pay or charge VAT if the goods are outside of the UK at the time of sale. However, the OMP is responsible for collecting and paying VAT and providing VAT invoices to customers.
B2B sales less than £135 – Like earlier, your sale will look like a B2B supply to your chosen Online Market Place. This again falls outside of the new VAT regulations in the UK. It means you don’t need to pay VAT, unlike the other conditions mentioned above. You are also not responsible for providing VAT invoices to your business customers. If the OMP has the business customer’s VAT registration number, it can consider your sale as B2B zero-rated supply. The OMP may not collect or charge VAT but instead, issue a VAT invoice saying that the business customer is accountable for VAT charges by reverse change.
These terminologies may seem confusing. If you want professional help regarding VAT registration or explaining these rules in simpler terms, you can contact Infinity22, an ecommerce business advisory agency. Call us at +61452 184 421 to know more about the new VAT rules in the UK.
Here at Infinity22, we help entrepreneurs get the most out of their online businesses. Whether it’s Amazon, Shopify or anything else online. You know you are in good hands. CLICK HERE to organise a meeting.