There will be lots of VAT changes for businesses that import or export goods from 1 January 2021, but let’s start with businesses which import low value goods that cost less than £135 per parcel.
At present goods valued at less than £135 can enter the UK will no VAT charged as the goods have often not been declared by the overseas seller for VAT and customs duty. From 1 January 2021 all goods entering Great Britain – there will be different rules for Northern Ireland – must be subject to supply VAT or import VAT.
Where the parcel contains goods worth £135 or more those goods are subject to import VAT – which can be postponed (ie not paid at time of import) by a VAT registered purchaser.
Supply VAT can’t be postponed. The overseas seller of the low value goods will have a choice:
- Ask the UK buyer for their VAT number – the goods can then be sold with no VAT added, but the UK buyer must account for the UK VAT due as a reverse charge in their own VAT records.
- Register for VAT in the UK and charge UK VAT on the sale to the UK customer.
- Sell through an online market place (OMP) which is registered for VAT in the UK. The OMP charges VAT to the UK buyer and issues the sales invoice.
You need to be aware of these VAT changes. We will cover more VAT issues relating to Brexit in the coming weeks.
Written by the Tax Advice Network