HMRC have published detailed rules for sales of consignments of goods valued at or below £135. For some time HMRC have been concerned that overseas vendors were not charging and accounting for UK VAT and these rules seek to remedy this.

Businesses selling goods in this value bracket will need to manage the following variables:

• are the goods being sold coming from outside the UK or are they already in the UK when sold?
• are the goods sold direct by the vendor, or via an online marketplace (OMP)?
• is the customer a UK consumer or a UK VAT registered business?
• will the goods be sold to Northern Ireland (NI)?
• are the goods excluded goods, falling outside these rules?

The answer to each question will drive the VAT treatment. Multiple VAT treatments are possible, and accounting and sales system coding will need to be reviewed by both overseas vendors and OMPs. It may be possible to simplify matters by varying the sales agreement used between the overseas vendor and marketplace as well as the overall sales model. It is important to remember that Great Britain and Northern Ireland will operate under different rules, even though they are both part of the UK. The rules below apply to GB (England, Scotland and Wales). Trading with NI will require review of separate rules.

It is worth noting that the £15 low value consignment relief rule has now been removed.

Overview

In general, import VAT will no longer be collected at import, but rather sales VAT on the sale of the goods will be collected, where the consignments of goods are valued at £135 or below. That said, in order to enter the UK consignments not exceeding £135 will still require customs declarations, though these may be less detailed.

• Some sales will be excluded from these new rules, including consignments containing any excise goods, or non-commercial transactions between private individuals.
• If an overseas vendor sells goods from overseas direct to a UK consumer, then it will be required to register for VAT and charge and account appropriately. However, if sold to a UK business customer who can provide a VAT number, then the obligation transfers to the UK business customer, who will account for VAT under the reverse charge.
• If an OMP facilitates the sale then they will be deemed to be selling the goods and will become responsible for charging, collecting and accounting for the VAT. This imposes a VAT registration obligation on the OMP.
• Where the goods being sold are already located in the UK, then different rules will apply. The goods could be sourced from the UK, or have already been imported into the UK, in which case the importer would have paid and accounted for import VAT, under the new postponed import VAT accounting procedures. If the importer is the overseas vendor, then they will want to be VAT registered to reclaim this.
• Consignments of goods valued at £135 or less, which are located in the UK, when sold direct by the overseas vendor to UK consumers or VAT registered businesses, will require this vendor to be UK VAT registered and charge and account for VAT.
• If the same goods are sold via an OMP to UK consumers, then HMRC will now require the OMP to account for the VAT, but only when sold to UK consumers.
• If an OMP sells these goods to a UK VAT registered business that provides its VAT number, then the OMP passes this information to the overseas seller who will be seen to be making the sale direct and will charge and account for the VAT, not the OMP. However, if a UK business fails to provide a VAT number, the sale is treated as though made to a UK consumer by the OMP.
• There is no VAT registration threshold for businesses not established in the UK, so the overseas seller is liable to register and account for VAT as soon as it starts making sales or holds stock for sale in the UK.