2021 will see a significant change in the VAT treatment of low value goods sold (below £135) through Online Marketplaces to non-VAT registered customers in the UK and EU. This will predominantly be in respect of B2C sales but will also effect sales to businesses without a VAT registration.
It is in reaction to the large volume and value of goods entering the UK and the EU from outside these jurisdictions that at present are not subject to import VAT. This gives overseas suppliers a competitive advantage over their UK/EU counterparts whose sales are subject to local VAT.
The new laws are also intended to ensure that overseas sellers account for VAT on the sale of goods that are located in the UK at the time of sale. This will capture sales by overseas businesses that hold a stock of goods in the UK/EU and make sales of these goods without charging local VAT.
The rules will take effect:
- In the UK from 1st January 2021, coinciding with the end of the transition period
- In the EU from 1st July 2021, coinciding with the launch of the new ‘One Stop Shop’ for the sale of B2C goods intra-EU.
What does this mean?
In effect the new laws will mean that, for the sale of goods located outside the UK/EU at the time of sale (ie. it will include trade between the EU and UK as a result of Brexit) with a value below £135 made via an ‘Online Market Place’, the Online Market Place operator will be required to act as a buyer and seller of the goods for VAT purposes (though this does not change the underlying legal position) and account for the VAT on the sale (e.g. UK VAT if the sale is to a UK customer). The overseas seller will be deemed to make a zero-rated supply to the Online Market Place.
Where the sale is not via an Online Market Place then the supplier will not pay import VAT but will be required to VAT register and charge the local rate of VAT.
The rules do not effect goods that are destined for a customer outside the UK/EU, nor are they applicable for goods that are destined to remain in the UK (i.e. UK seller to UK buyer) or in the EU (i.e. EU seller to EU buyer).
Further changes in the EU
On 1st July 2021 the EU is introducing a new system for accounting for VAT on the sale of goods B2C known as the ‘One Stop Shop’. It will allow for overseas businesses to VAT register in a single EU jurisdiction (e.g. Netherlands) and submit a single VAT return for all EU B2C sales of goods. This will simplify the VAT accounting for those EU sales that fall within the new regime (i.e. products originating from outside the EU).
Do I need to do anything?
As part of a wider assessment of the impact of Brexit, those businesses that sell low value items to private individuals in the EU or the UK will need to consider whether they are effected by:
• the changes in rules regarding Online Market Places
• the new ‘One Stop Shop’ that is being introduced for B2C sales to EU customers
The next step
Contact your usual UHY adviser or the UHY VAT team if there is any uncertainty.