European businesses shipping to UK consumer see VAT rule changes

European businesses shipping goods to the UK consumer with a value shy of £135 will now need to be aware of the need to collect the VAT at the point of sale, according to changes made on the back of Brexit.

Announced at the start of the year, the rule change will not affect shipments to consumers that run north of £135, which will remain subject to the existing rules. Those consignments that do register will now no longer have VAT collected on importation or delivery to the customer.

According to the announcement, those businesses that are UK VAT registered “will be able to utilise postponed VAT accounting to account for import VAT on their tax return.”

The announcement clarifies:

  • if an OMP is not involved in facilitating the sale, there will be a supply direct from the seller to the consumer, which will be deemed to take place in the UK and so liable to UK VAT.
  • if an OMP is involved in facilitating the sale, they will be deemed, for VAT purposes, to be making the supply to the UK consumer, which will be deemed to take place in the UK with UK VAT chargeable accordingly.

The calculation of the value for VAT purposes will be set against the price to which the business sells to the consumer, as opposed to any valuation calculated at the point of importation. The rules will apply irrespective of where the business selling goods is based.

As a result overseas businesses selling in to the UK for the purpose of the consumer will now have to register for UK VAT and begin accounting to HMRC.

The rules, in theory, should not further affect businesses who sell into the UK, but have stock supply based domestically as such businesses should already be registered and keeping tabs on the sales tax.