How online marketplaces will deal with VAT for goods from overseas that are sold to customers in Great Britain from 1 January 2021.
New rules for January 2021
The UK has left the EU, and the transition period after Brexit comes to an end this year.
This page tells you what you’ll need to do from 1 January 2021. It will be updated if anything changes.
Check what else you need to do during the transition period.
There is separate guidance for overseas goods sold directly to customers in Great Britain from 1 January 2021, that have not been made on an online marketplace.
From 11pm on 31 December 2020, UK supply VAT is due at the point of sale on consignments of goods with a value of £135 or less that are outside Great Britain (England, Scotland and Wales) and are sold in Great Britain.
The £135 limit applies to the value of a total consignment that is imported, not the separate value of individual items that are in a consignment.
Where those goods are sold through an online marketplace, the online marketplace will be liable for the VAT.
Online marketplaces will also be liable for the VAT on goods of any value that are located in the UK at the point of sale and sold by an overseas business through an online marketplace.
Guidance for goods sold in Northern Ireland will be published at a later date.
These rules will not apply to the import of:
- consignments of goods containing excise goods – find out more about importing excise goods to the UK from the EU from 1 January 2021
- non-commercial goods (for example, gifts) – find out more about tax and customs for gifts sent from abroad
These rules will also not apply to consignments of goods from Jersey and Guernsey, if VAT is collected and paid to HMRC under the Import VAT Accounting Scheme.
What an online marketplace is
HMRC’s definition of an online marketplace is a business using a website or mobile phone app (such as a marketplace, platform or portal) to handle the sale of goods to customers which meets all of the following conditions:
- in any way sets the terms and conditions on how goods are supplied to the customer
- is involved in any way in authorising or facilitating customers’ payments
- is involved in the ordering or delivery of the goods
A business will not be classed as an online marketplace if it only provides one of the following services:
- processing of payments for the supply of the goods to the customer
- listing or advertisement of goods
- redirection or transferring of customers to other websites or mobile phone apps where goods are offered for sale, without any further involvement in any sale that might take place on that website or app
Goods that are outside of Great Britain at the point of sale
The seller of the goods must work out the consignment value of the goods by deciding their ‘intrinsic value’, this is the price the goods were sold for, not including:
- any transport or insurance costs, unless they are included in the price and not separately shown on the invoice
- any other identifiable taxes and charges
Unless sent individually, the seller must add the individual values of all items in a consignment together to get the total value of the consignment.
If the seller make changes to the value of the consignment so that its total value goes above £135 they may be liable for import VAT, and have to adjust the VAT already accounted for at the point of sale.
Consignments valued at £135 or less
The online marketplace must charge and account for VAT at the point of sale, unless the consignment is a business to business sale and the customer has given their UK VAT registration number.
To charge and account for VAT the online marketplace will need to:
- know the precise nature of the goods to find out the correct rate of VAT to charge
- register for VAT – online marketplaces that are already registered for VAT do not need to re-register
- keep records of the goods sold, and make sure they get accurate information to apply the correct VAT treatment to the goods
The online marketplace will be held liable for under-declared VAT if they cannot show they have taken reasonable steps to make sure the correct VAT was charged.
Business to business sales to UK VAT-registered customers
The online marketplace will not need to charge and account for VAT if the customer gives them their VAT registration number, and they confirm it’s correct using the new online service that will be available from December 2020.
The online marketplace can add a note to the invoice (for example, by writing ‘reverse charge: customer to account for VAT to HMRC’) then send it to the UK business customer.
The business customer will then be responsible for accounting for any VAT due on their VAT Return using a ‘reverse charge’ procedure, and will be able to recover the VAT as input tax on the same VAT Return under normal VAT recovery rules.
Consignments valued at more than £135
Normal VAT and customs rules will apply.
Read VAT Notice 702 to find out more about how imported goods are treated for VAT purposes.
Goods that are in Great Britain at the point of sale
Importing goods to sell through online marketplaces
The overseas seller will remain liable for import VAT and Customs Duty on the importation of the goods. When the goods are sold to the customer, the overseas seller will be considered to have made a zero-rated supply of the goods to the online marketplace. The overseas supplier does not have to issue invoices to the online marketplace for supplies that are considered to be zero-rated.
UK VAT will be due at the time the sale of goods takes place.
The online marketplace will be liable to account for the VAT on the sales made through its marketplace, unless the goods are for a business customer who gives them their UK VAT registration number.
Goods sold to UK VAT-registered businesses
The online marketplace should pass on all the details of the sale (which should include the VAT registration number of the business) to the seller on the marketplace. The seller will be liable to account for the VAT on the sale.
The normal rules for the content and format of VAT invoices will apply.
The online marketplace should issue a full paper or digital invoice for goods.
The online marketplace must keep full records (including VAT invoices) for 6 years from the date any goods are sold.
Find out more about VAT record keeping.
Goods sold before 1 January 2021
If the online marketplace receives payment for an order before 11pm on 31 December 2020 and dispatch the item after that time, these rules will not apply.