Effective January 1, 2021, all non-UK businesses selling goods to the UK will need to register for value-added tax (VAT). This means that most non-UK sellers will need to charge VAT on sales made to UK customers at the point of sale and need to comply with all VAT reporting procedures. Those already registered may use their existing UK VAT registration and do not need to re-apply.
The HMRC website states the reason for this change is to “ensure that goods from EU and non-EU countries are treated in the same way and that UK businesses are not disadvantaged by competition from VAT free imports. It will also improve the effectiveness of VAT collection on imported goods and address the problem of overseas sellers failing to pay the right amount of VAT on sales of goods that are already in the UK at the point of sale.”
Online market places (OMPs) that facilitate the sale will be responsible for collecting and reporting VAT. Otherwise, non-UK sellers hold the responsibility for collecting and reporting VAT. For imports less than £135 directly to UK consumers, VAT will be collected at the point of sale rather than the point of import. Sales to businesses less than £135 will also need to comply with the new rules, however, if that business customer provides their VAT registration number, the VAT will instead be accounted for by the UK business customer.
These changes do not affect non-business sales that are between private individuals. These changes also do not affect sales of goods outside of the UK for values greater than £135. Existing customs rules still apply.
Please consult your Henry+Horne tax professional for guidance. This information is general and should not be relied on.
Jill A. Helm, CPA