Are you an overseas seller and sell goods less than £135 in value to UK customers?

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vat changes

Changes to VAT administration for items less than £135 in value

Vat registered businesses in the UK that trade within the overseas sellers are having changes in the way they account for VAT January 2021.

The main issue with the revenue is that they would like VAT to be treated the same way for all overseas sellers.

With their new plans, they intend that the new system will improve the way VAT was previously collected and rate applied for overseas goods.

changes to vat

Some of the changes that are implemented in January 2021.

In this blog post, I have explained some of the changes that will be implemented on items less than £135 in value.

They are as follow

Changes in the point of sale for goods from overseas that cost less than £135 in value.

When goods are imported into the UK and they cost less than £135 in value, the point of sale for the items has been moved to point of importation into the UK.

The point of sales is usually the time when that Vat is collected on items.

Previously, VAT was collected at the point when they were being imported into the UK.

Abolishment of Low-value consignment relief.

One of the changes that have been introduced is the abolishment of the Low-value consignment relief.

This relief previously ensured that business owners do not pay import VAT on goods that are £15 or less in value.

If these items are bought online, the seller’s will be responsible for collecting the VAT and reporting to HMRC on their VAT returns.

Overseas traders that sell such items directly to UK consumers are now required to be registered for VAT so as to account for VAT to HMRC.

vat changes

What happens when Business to Business sales transaction does not exceed £135 in value?

When an overseas seller sells items not over £135 in values to a UK VAT registered customer, the customer based in the UK can account for the VAT on the items.

To be able to do this, the UK VAT registered business will have to provide their Vat registration to the seller.

They will then account the Vat to HMRC by means of reverse charge.

The point of sales for overseas sellers when the goods are less than £135 in value are already in the UK at the point of sale.

For overseas sellers that have their goods that are less than £135 in value and are already in the UK, the person that is now responsible for accounting for VAT from an overseas seller will be the online market place where such items are sold.

The exception to this is if the items are being sold by the overseas seller directly to the individuals, then the Vat is still accounted for by the overseas seller.

vat changes

Border and custom declarations for items less than £135 in value.

The border and customs will no longer be responsible for VAT collections for goods less than £135 based on these new changes.

But from January 2021, they will still be responsible for collecting custom declaration from overseas sellers for non-fiscal purpose.

Conclusion for the changes to VAT from January 2021.

The time for the implementation of all these changes is very near.

Every business that will be affected needs to plan for these changes.

Preparation for these changes can include VAT registration and account for VAT for businesses that are currently not expected to be VAT registered.

If you would like us to support you with services related to VAT or other compliance issues kindly contact us.

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