Are You Selling Goods Online? Here’s How You’re Accounted For VAT.

Especially amidst pandemic times, there’s no denying that many of us are hitting that “add to cart” button from the comforts of our homes. While online sellers have much to benefit from this new norm, it’s also important to take note of tax measures in-place from 1 January 2021.

In this blog post, we take you through when to register for VAT, amounts payable and VAT registration for both local and overseas sellers.

1. Am I considered to be an online marketplace?

On top of using a website or mobile phone app to handle the sale of goods to customers, your business should:

Set the terms and conditions on how goods are supplied to the customer.
Be involved in any way in authorising or facilitating customers’ payments.
Be involved in the ordering or delivery of the goods.

If your business only provides the following services, though, it might not fit under this category:

Processing payments for the supply of the goods to the customer.
Listing or advertising goods.
Redirecting or transferring customers to other websites or mobile phone apps where goods are offered for sale, without any further involvement in any sale that might take place on that website or app.

2. UK VAT For Overseas Sellers

As long as you’re storing your goods in the UK and later selling them on an online marketplace, you’ll have to pay an import VAT and customs duty on the initial import.

If the UK customer is VAT registered, the sale is made by you. In this case, you will charge VAT at the appropriate UK rate in respect of your goods.
If the UK customer is not VAT registered, the sale is deemed to have been made by the online marketplace. Here, they will charge the customer the appropriate rate of VAT, while you’re considered to have made a zero-rated supply to the online marketplace of the goods.

It’s a slightly different story if you’re storing your goods outside the UK, though:

If the sale is under £135, the sale is deemed to have been made by the online marketplace. They will charge the customer the appropriate rate of VAT.
On the other hand, if the sale exceeds £135, your customer pays import VAT when the goods reach the UK border.

3. UK VAT For Local Sellers

When you’re making sales to UK customers, these are considered to be goods that are supplied and sold within the borders. You’ll need to register for UK VAT if your threshold exceeds - after which you’re charged for tax.

On the flipside, supplies made to EU customers will be subject to local VAT and customs duty only. There are a few exceptions you might want to take note of:

Consignments less than €150 are not subject to customs duty.
If the UK supplier is the importer of record, destination VAT would be payable by them: this would require VAT registration in the destination state.

Since 1 July 2021, you also can easily account for VAT on supplies to consumers in the EU without the need for multiple VAT registrations - through the latest Import One Stop Shop (IOSS).

With that being said, do note that you have to account for supply VAT if you’re registered for IOSS - on imports of low value (<€150) goods into the EU and Northern Ireland.

4. What information do I need to provide if I’m selling goods in the UK?

The online marketplace provider is likely to ask for the following if it thinks you should be registered for UK VAT:

VAT registration number (VRN).
Information about the location of the goods at the time of sale.
Your terms and conditions of sale.
Where you are located (i.e. your business and fixed establishments)
How you fulfil orders from UK customers and how quickly.

Right Accounts provides quality and professional services for your VAT applications - we help your EU businesses to get registered for VAT in the UK. We also save the hassle of tax-return forms by completing them for you.

Contact us here.