Post-Brexit VAT Rules for UK and EU E-Commerce Businesses on Amazon and Online Marketplaces
Before the UK officially left the EU, E-commerce companies set up in the UK had easy access to a nearby market of nearly 748 million citizens—almost a tenth of the world’s population. Best of all, they could sell to these consumers almost as easily as if they were selling to their next-door neighbour. Unfortunately, Brexit looks set to cause ongoing disruption for British businesses of all shapes and sizes—and that applies to E-commerce companies, too.
From the 1st January 2021, all E-commerce sellers and marketplaces have to abide by new VAT rules when exporting goods based in the EU into the UK. The VAT rules depend on whether your products are located outside or within the UK at the time of sale, and whether they are valued above or below £135
Who Charges VAT for Goods Located Outside the UK at the Time of Sale (Valued Over £135)?
Who Charges VAT for Goods Located Inside the UK at the Time of Sale for Non-UK sellers in the EU?
What Changes Online Marketplaces (OMPs) Need to Know
What Changes Businesses Fulfilling Orders via Amazon or Amazon FBA Need to Know
More Tips on Brexit for Small Businesses
Goods Located Outside the UK at the Time of Sale for Products Under £135
Both UK- and EU- based sellers must charge sales VAT at the point of checkout.
But, if you’re selling through a facilitating online marketplace (OMP) like Amazon, then the OMP would be responsible for charging VAT as in this arrangement, they’re deemed to be the supplier.
In either case, you’ll have to provide a VAT invoice to accompany the goods as they pass through customs. The VAT will then be paid by the seller or by the OMP when they submit a regular UK VAT return.
Key Points to Remember
- Clearly state that VAT was paid at the point of sale.
- Remember the £135 total excludes additional costs involved in supplying the goods (travel, insurance, import taxes, etc.).
- If the customer is a VAT-registered business here in the UK, they should provide the seller/OMP with their VAT number—this means the UK customer can use the reverse charge mechanism.
Who Charges VAT for Goods Located Outside the UK at the Time of Sale for Products Valued Over £135?
For this arrangement, the old rules still apply. That is, the seller is in charge of paying the import VAT and duties, which they can then reclaim if they have a UK VAT number.
However, the seller may decide to have their customer pay at customs or to the delivery agent—but this will certainly be the exception, rather than the norm.
Who Charges VAT for Goods Located Inside the UK at the Time of Sale for Non-UK sellers in the EU?
If your goods are located within the UK then different VAT rules apply—though these vary depending on the nature of the company in question. It also depends if you are selling on an Online Marketplace or not.
Non-UK Sellers Using an Online Marketplace (for B2C Goods)
Let’s say your company is an Italian company and you sell shoes via Amazon. Your inventory however, is currently being held in an Amazon warehouse in the UK. In this scenario, the online marketplace, i.e. Amazon, would be deemed the supplier for VAT.
This applies to any value of goods—so the £135 rule is essentially scrapped.
This is because the seller will have already paid import VAT when moving the goods from wherever they were manufactured into the UK-based Amazon warehouse. All they will have to do is to sell the shoes to Amazon as a zero-rated supply and Amazon will then sell the goods to the end-consumer using the normal UK VAT rates.
Non-UK Sellers Using Your Website
If you are a bespoke handbag company selling bags on your website, then the old rules apply. Your company must be registered for UK VAT and charge this UK VAT to any businesses or consumers that you deal with.
What Changes Online Marketplaces (OMPs) Need to Know
An online marketplace is a type of e-commerce website where products or services are provided by many 3rd party sellers.
OMPs must have several key pieces of information to hand for any given purchase:
- Where the items are being shipped from.
- The overall value of the goods.
- If the goods are already within the UK at the time of sale, and if so, whether the seller is also based in the UK.
- Whether or not the customer is a VAT-registered business located in the UK. If they are, they won’t have to pay tax on all imported goods that fall under the £135 threshold.
- The nature of the goods—this will determine whether they’re subject to standard, reduced, or zero-rated VAT rules.
What Changes Businesses Fulfilling Orders via Amazon or Amazon FBA Need to Know
Up until now, Fulfilment by Amazon (FBA) has allowed all EU-based e-commerce companies to benefit from the European Fulfilment Network (EFN).
UK-based e-commerce companies could send their inventory to Amazon fulfilment centres in the UK. Amazon would then handle the rest of the process, sending these goods over to Europe and making sure the orders were fulfilled.
Now, however, UK-based e-commerce companies will no longer be able to benefit from this system. Instead, they’ll need to handle the process of exporting their inventory over the border to Amazon’s European fulfilment centres themselves.
More Tips on Brexit for Small Businesses
No matter what kind of e-commerce business you’re running in the UK or EU, you will surely be impacted by Brexit if you have customers on both sides. If you feel overwhelmed by the changes and updates that happen every day, don’t worry. We are on your side. Watch our blog for more info on government grants and other Post-Brexit accounting tips for e-commerce businesses.
