Since 1 January 2021, the UK has not been recognised as an EU territory for VAT purposes. This raises a number of tax settlement issues. In what cases are you obliged to register for VAT in the UK? Who is responsible for clearing customs duties and VAT on incoming goods? When does the sales platform pay VAT for the seller? Answers to these and other questions about selling on the UK market can be found in the following article.
What are you going to read about?
1. Dispatch of goods from Poland to the UK
2. £135 limit for shipments of goods to UK customers
3. Export – application of the 0% VAT rate in Poland
4. Shipping goods from the United Kingdom
5. Online Marketplaces – (OMPs)
6. What is an EORI number and when is it required?
7. Do you want to ship orders to UK customers?
Dispatch of goods from Poland to the UK
1) Selling through your own online shop
If you are selling from your own online shop, you may be required to register for VAT in the UK regardless of the turnover achieved.
Because, as a general rule, any sale that is taxable in the UK will result in an obligation to register for VAT and file local tax returns.
When is a transaction subject to VAT in the UK? Firstly, you must establish the status of the purchaser.
- If the purchaser is a VAT payer in the UK, you are not obliged to register for VAT.
- If the customer is a consumer (private individual), you should establish the transaction value, as you have to account for transactions with a value of less than $135 in your VAT return.
Transactions with a value exceeding £135 and sold to UK VAT payers are subject to standard customs clearance, and the importing party (usually the purchaser) are charged with customs duties. Therefore, if you make only shipments with total value exceeding £135, there is no obligation to register for VAT in the United Kingdom.
2) Sales conducted via online platforms
Starting from 1 January 2021, the UK government imposed additional obligations on companies running sales platforms (such as Amazon or eBay). The objective of these changes was to improve the collection of VAT from overseas sellers. If you sell through sales platforms operating in the UK (known as OMPs – Online Market Places), in most cases VAT will be collected and paid to the Inland Revenue by the OMP. The OMP has a duty to account for VAT for non-UK shipments of £135 or less. As such, sales conducted via platforms do not require the seller to register for VAT in the UK.
£135 limit for shipments of goods to UK customers
The £135 limit on the amount of VAT that can be applied to UK sales is often mentioned in
materials relating to UK shipment taxation.
According to the clarifications published on the UK Ministry of Finance website, the limit should be calculated according to the following principles:
- the transaction value should be interpreted as the price payable by the customer (market value),
- If a customer buys more than one product, the total cost of the order is the transaction value,
- the transaction value does not include transport costs or other extra charges, such as customs duties.
Below the above limit, shipments also benefit from exemption from UK customs duties.
Export – application of the 0% VAT rate in Poland
When goods are sent to customers in the UK from Poland, it is important to remember Polish tax regulations and duties arising from them. In order to apply the 0% VAT rate (as export of goods), it is necessary to have confirmation of customs clearance (message IE 599) VAT may be charged in both Poland and the UK if there is no relevant documentation.
If you don’t have confirmation of customs clearance, you can apply the VAT rate for the export of goods provided that you have other proof that clearly confirms that he goods have come from the UK.
We suggest you consult your tax adviser on this issue.
Shipping goods from the United Kingdom
When businesses use sales platforms, they often choose a collaborative fulfilment model (e.g., Amazon FBA
), where the platform takes care of warehousing, customer service, and sending out packages. It is worth remembering that the stocking of goods in UK requires registration for VAT with the local authority.
Indeed, in the case of warehousing goods in the UK, there are no limits on the value of transactions – all sales are subject to VAT.
Among other things, the amount obtained from the sale of products stocked in the UK (including via sales platforms) and any local purchases of goods must be shown in the tax returns. However, the mere dispatch of goods to a warehouse in the UK is not subject to VAT in Poland.
Online Marketplaces – (OMPs)
The UK tax legislation imposes additional obligations on sales platforms (OMPs).
Specifically, OMPs are required to collect and pay VAT to HMRC – a government agency of HM Revenue & Customs – on sales made by non-UK-based entities. At the same time, the seller is required to report for VAT purposes sales to OMPs at 0% rate
(even though the OMP does not purchase the products).
According to clarifications published by HRMC, the above scheme does not apply to B2B transactions
(supplies made to UK VAT taxpayers). Consequently, the seller will be responsible for accounting for and paying tax to HMRC in this case.
Notwithstanding obligation to account for tax on part of OMP, sellers who stock goods in the UK will still be required to register and account for VAT in the UK
– including on imports of goods, supplies to OMP and B2B sales.
What is an EORI number and when is it required?
If you are shipping goods to customers outside the European Union (e.g. the United Kingdom or the United States), you may have encountered a situation where the transport company asked you to provide an EORI number. The EORI number is needed to export goods from the territory of the European Union or to import goods from “third countries”,
like China. One EORI number is enough for use within the European Union.
For example, the EORI number assigned in Poland can be used for customs clearance in Germany. From 1 January 2021, it is necessary to have a separate EORI number in the UK. If you are shipping goods from Poland to Amazon’s UK warehouse, you will need to obtain an EORI number in both Poland and the UK.
Do you want to ship orders to UK customers?
The above regulations and restrictions may seem complicated. If you decide to expand your business in the UK, contact the specialists at Taxology,
who will take care of all the tax formalities, help you with VAT registration & UK VAT returns, and organize your accounting & tax processes, among other things. Taxology helps both sole traders and large e-commerce companies to enter other EU markets.