The VAT rules are different where the goods are supplied to the consumer in a single consignment (e.g. a parcel) of £135 or less and those where the consignment exceeds that limit.
There is also a difference between sales by non-established taxable persons (NETP), i.e. those who have no physical presence in the UK and sales through a UK business establishment of the non-resident. This note deals only with sales by NETPs.
Goods under £135 where the goods are outside the UK at the time of the sale
- Sales through online market places (OMP) such as Amazon or e-Bay: The OMP is responsible for charging and collecting the VAT. There is no tax on import, but the sale is deemed to take place in the UK. For example, if the goods are sold for £120 (and they are not zero-rated goods) Amazon will receive the £120 from the customer, pay £20 of it to HMRC as VAT and pay the other £100 (less their fee) to the overseas seller. It is clearly important that the overseas seller either quotes prices as exclusive of VAT (i.e. he advertises the goods for £100 plus VAT so that Amazon will charge the customer £120 and pay the seller the £100 that he was expecting) or increases his prices by 20%, so that the amount left after VAT gives him the price that he wanted to receive.
- Sales through the NETP’s own website or by mail order: VAT is not payable on import but the sale is deemed to be made in the UK so the NETP needs to register for VAT in the UK, charge VAT to the customer and account for the VAT to HMRC.
- Sales to businesses: The customer is liable for the VAT under the reverse charge mechanism, i.e. he is treated as selling the goods to himself before then selling them to his customer. However, a sale can be treated as being made to another business only if the business provides its VAT number to the supplier (or to the OMP in the case of sales through an OMP). The seller is required to note on its invoice to the customer that it is a reverse charge supply.
- Sales of Excise goods: These special rules do not apply to goods that attract excise duties (or to sales by private individuals or to sales from Jersey and Guernsey within the Import VAT Accounting Scheme).
Goods up to £135 where the goods are in the UK at the time of Sale
The seller will have either bought the goods in the UK or have imported them into the UK so will normally want to register for VAT in the UK so as to recover VAT paid on import or on purchases.
- Goods sold through an OMP: The seller is deemed to make a zero-rated supply to the OMP. That will allow it to recover its input tax, but not have to charge VAT to the OMP. The OMP then makes a taxable supply to the customer and accounts for the VAT to HMRC.
- Sales through the NETPs own website or by mail order: The normal rules on sales by a UK registered person apply to such sales.
- Sales to UK businesses through an OMP: The OMP must obtain the customer’s VAT number and provide it to the supplier. The supplier then charges VAT directly to the customer and accounts for it to HMRC.
Goods in Consignment of over £135
- If the seller is an NETP the OMP is responsible for the VAT even on goods over £135. However, the NETP itself is responsible for the VAT on import. It will accordingly need to register for VAT in the UK and will be deemed to make a zero-rated supply of the goods to the OMP in the same way as for sales under £135.
- If the customer is a VAT-registered business, the OMP is not liable for the VAT provided that it obtains the customer’s VAT number and passes it on to the NETP. The NETP will then be treated as making a taxable supply direct to the customer and will have to charge VAT to the customer and issue a VAT invoice to it.
When does an Overseas Seller not need a VAT Registration?
He will not need a registration if either:
- He sells goods to UK consumers for under £135 and only sells through OMPs, or
- His sales to UK customers are in consignments of over £135 and the customer is always the Importer of Record, i.e. the goods are sold to the customer while they are overseas and it is for the customer to arrange for them to be brought into the UK.