23rd November 2020
EU businesses selling goods to UK consumers should be aware of the new rules that will be in place from 1 January 2021. Following the change, there may be a new requirement for EU businesses to register for UK VAT. MSI's UK accounting member haysmacintyre explains further.
Currently, when an EU business supplies goods to a UK private consumer (B2C), the EU supplier charges EU VAT to the customer. This is the standard until the value of the supplies made to the UK exceed the distance selling threshold (currently £70,000), above which point the EU business must register for VAT in the UK and begin charging UK VAT to the consumers.
From 1 January 2021, the rules are changing. The changes are as follows:
Currently if there is an import of goods into the UK with a value of less than £135 this can be treated as being VAT-free under the Low Consignment Stock relief. This relief will no longer be in place from 1 January 2021, so all goods with a value of less than £135 will then be treated in the same way.
If the value of the goods being imported into the UK does not exceed £135, the point at which VAT is collected becomes the point of sale rather than the point of importation. This means that if an EU business (or any overseas business) is selling goods to a private consumer and the value of the goods is less than £135, there will be a requirement for the EU business to register for UK VAT and charge UK VAT at point of sale on the supply being made to the end customer.
If the value of the goods exceeds £135, the existing import VAT procedures will apply. This means that the importer of the goods is required to be registered for UK VAT and charge UK VAT on these supplies, including EU businesses.
However, there is currently an option to have the end consumer take responsibility for the cost of import into the UK. If EU businesses opt to take this route, the consumer is required to pay the import VAT when the goods arrive but the EU business does not need to charge VAT to the customer so would not be required to register for UK VAT.
A further point to note is that if goods that are already in the UK are being sold by an Online Marketplace (OMP), it will be the OMP that is deemed to be making the supplies for VAT purposes.
If you are an EU business that is selling goods to UK consumers, or an OMP, you should consider whether the new rules will lead to a requirement for you to register for VAT in the UK. We would of course be happy to assist with any VAT registration applications and future compliance requirements.
If you wish to discuss this matter, or other VAT concerns further, please contact Stephen Patey at our member firms haysmacintyre.
haysmacintyre are a full service, award winning mid-tier firm of Chartered Accountants and tax advisors in central London, providing advice to entrepreneurs, fast-growing and owner-managed businesses, charities and not for profit organisations across the UK and internationally.
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