New UK VAT rules for imports in consignments up to £135
11 February 2021| CATEGORIES: Uncategorised| TAGS:
Following the UK’s exit from the EU, new VAT rules apply to goods entering the UK in consignments valued at up to £135. The changes include:
- the abolition of low value consignment relief, which currently exempts consignments of goods up to £15 from import VAT;
- a new requirement for overseas sellers to charge UK VAT on goods sent in consignments not exceeding £135. These consignments will not be subject to import VAT at the border.
EU distance selling rules no longer apply in Great Britain (England, Scotland and Wales). However, under the terms of the Northern Ireland Protocol they still apply to sales of goods by EU sellers to customers in Northern Ireland.
How is the VAT collected?
The changes mean there is a new UK VAT registration obligation for overseas sellers of goods that are outside the UK at the time of sale and are imported in consignments valued below the £135 threshold.
Direct sellers now need to:
- register for VAT in the UK (if not already registered); and,
- charge UK VAT on sales to UK customers at the point of sale.
The seller should provide the customer with a VAT invoice at the point of sale.
If a sale is made via an online marketplace (OMP), the OMP operator will be the deemed supplier and responsible for charging the VAT.
How is the £135 threshold determined?
The £135 threshold applies to the value of the consignment, not to each individual item within the consignment.
The value of the consignment is based on the VAT exclusive selling price of the goods, excluding separate transport and insurance costs and other taxes.
To determine the correct VAT treatment sellers need to know whether goods will be packaged and sent singularly to the customer or as part of a consignment with other goods.
Business to business (B2B) sales
If a customer provides its UK VAT registration number to the seller, responsibility to account for the VAT switches to the business customer. This is done via their UK VAT return by means of a reverse charge. The seller must include a reference to ‘reverse charge’ on the invoice.
How are imports above £135 treated?
If the total value of a consignment is over £135 then normal VAT and customs rules apply, meaning that import VAT and customs duty (where applicable) are due at the border and UK VAT is not chargeable at the point of sale.
Customs declarations
Customs declarations are required under the new rules and border checks will take place.
It is very important that the customs declarant for goods entering the UK is provided with all the relevant information regarding consignment value and the VAT treatment of the goods. Failure to do this could lead to delays at the UK border.
What businesses need to do
Businesses affected by these changes should:
- register for UK VAT;
- amend their checkout systems to charge UK VAT (when appropriate) and issue UK compliant tax invoices;
- ensure they can identify at the point of sale whether goods will be packaged in consignments above or below the £135 threshold;
- provide their customs declarant with the correct VAT information to avoid goods getting stuck at the UK border.
Please get in touch if you would like assistance with implementing these VAT changes or require a new UK VAT registration.