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Selling to UK Gets Complicated with VAT Tax Changes

Selling to UK Gets Complicated with VAT Tax Changes

Online marketplaces and ecommerce platforms have been warning sellers about changes when selling to the UK that take effect on January 1, 2021. The changes are due to Brexit (the withdrawal of the UK from the European Union) and relate to the collection of VAT (Value Added Tax).

Jumping ahead to a key takeaway: If you sell directly to UK consumers without the involvement of an online marketplace, you must register and account for the VAT to HMRC (the UK’s agency responsible for the collection and enforcement of taxation).

The UK government outlined changes on its website, writing the following by way of background:

“At the end of the transition period, the government will introduce a new model for the VAT treatment of goods arriving into Great Britain from outside of the UK. This will 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.”

The first 4 points under the section titled “Outline of the changes” on the government website about the VAT changes are particularly relevant to US sellers:

For imports of goods from outside the UK in consignments not exceeding £135 in value (which aligns with the threshold for customs duty liability), we will be moving the point at which VAT is collected from the point of importation to the point of sale. This will mean that UK supply VAT, rather than import VAT, will be due on these consignments.

“The new arrangements will also involve the abolition of Low Value Consignment Relief, which relieves import VAT on consignments of goods valued at £15 or less.

“Online marketplaces (OMPs), where they are involved in facilitating the sale, will be responsible for collecting and accounting for the VAT.

For goods sent from overseas and sold directly to UK consumers without OMP involvement, the overseas seller will be required to register and account for the VAT to HMRC.

Reading eBay’s messaging to US sellers can be helpful in understanding how the UK changes impact them. The following excerpt is particularly helpful: “US sellers who list on the US eBay site don’t have to take any action. Sellers who list directly on the UK or EU eBay sites will see an added field in the listing flow to show a VAT % applied along with the gross (tax included) amount.”

Optiseller, which published a post to answer questions it was receiving from eBay sellers, said the number-one question was how to make changes in bulk to VAT on eBay listings. Given eBay’s statement, it appears Optiseller is hearing from US sellers who list directly on UK or EU eBay sites. If that’s you, Optiseller put together a step-by-step guide on how to make changes in bulk using File exchange or eBay’s bulk edit tool.

Amazon posted a message about the UK VAT changes impacting US sellers on this page of Seller Central. We found information on Etsy’s Help pages under “Selling to UK buyers,” and here’s Shopify’s help page on the January 1st VAT changes.

Shopify warned sellers of the consequences of non-compliance in a letter it sent to merchants in mid-December. The ecommerce platform told sellers to be sure to comply with the new laws “to avoid products getting delayed at customs, unhappy customers, and potential fines.”

It’s important for sellers to stay informed about regulations when selling internationally – this is just the latest example of why that’s the case. The above information is no substitute for professional advice, so if you sell to shoppers in the UK, do your homework thoroughly.

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Ina Steiner
Ina Steiner
Ina Steiner is co-founder and Editor of EcommerceBytes and has been reporting on ecommerce since 1999. She's a widely cited authority on marketplace selling and is author of "Turn eBay Data Into Dollars" (McGraw-Hill 2006). Her blog was featured in the book, "Blogging Heroes" (Wiley 2008). She is a member of the Online News Association (Sep 2005 - present) and Investigative Reporters and Editors (Mar 2006 - present). Follow her on Twitter at @ecommercebytes and send news tips to ina@ecommercebytes.com. See disclosure at EcommerceBytes.com/disclosure/.