Updated 2021 UK VAT rules for U.S. or Canadian companies selling goods or services to the UK
If you are a U.S company planning on selling product to customers in the UK this is a 2-3 minute must read! Learn if you should charge taxes and report your sales to the UK. Summarized below are the most important tax rules for ecommerce in 2021.
What is VAT?
Consumption tax added to goods and services in almost all countries. VAT is added to all levels of the production and distribution chain. VAT incurred can often be reclaimed by U.S. and Canadian companies.
The United Kingdom is no longer part of EU (Brexit).
All movements of goods become imports or exports, subject to UK and/or EU duty and import VAT.
As a U.S. company it is not that beneficial to ship goods between UK and EU anymore.
Example: registered for VAT in the UK can ship directly to customers in England, Scotland, Wales and Northern Ireland.
January 1, 2021 - UK Ecommerce VAT Reform
Major differences between how North American should operate in these various situations:
1. Is your product/sale worth less or more than £135 GBP ($180 USD)?
2. Products sold through marketplaces/electronic interface (Amazon, eBay)?
3. Products shipped to fulfillment warehouses in the UK (Amazon, eBay)?
1. Sales of goods from your website to a private person in the UK
Sale is less than £135 GBP (about $180 USD) in the UK:
- You must register for a VAT number in the UK.
- (You do not need an intermediary agent for the UK.)
If your sale is more than £135 GBP (about $180 USD), you have two options:
Private customer pays VAT to customs.
- customer responsible for importing the goods
- your customer pays duty + 20% VAT to customs/post office/freight forwarder
or
U.S. company registers for a VAT number in the UK
- company pays duty and import VAT to customs
- collect VAT from your customer
- reports VAT quarterly in the UK
2. Sale through UK Online Marketplace (Amazon, eBay) ship directly from U.S. to Private Customers
Sale is less than £135 GBP (about $180 USD) in the UK:
Marketplace (Amazon) charges 20% UK VAT to private consumers at checkout.
- No duty and VAT due to customs upon import. Use marketplace import id.
- Marketplace acts as importer. U.S. merchant does not need to register for VAT in the UK.
If your sale is more than £135 GBP (about $180 USD), you have two options:
Private customer pays VAT to customs.
- customer responsible for importing the goods
- your customer pays duty + 20% VAT to customs/post office/freight forwarder
or
U.S. company registers for a VAT number in the UK
- company pays duty and 20% import VAT to UK customs
- collect 20% VAT from your customer
- reports VAT quarterly in the UK
Note: not all online websites are considered “marketplaces”. We are happy to answer questions about VAT differences between Amazon, eBay, Shopify, Etsy, Jet, Rakuten, Newegg, AliExpress etc. Please call 310-204-0805 or email us at vat@eurovat.com.
3. U.S. company stores goods in UK Fulfillment Warehouse (Amazon, eBay)
Marketplaces such as Amazon, eBay are responsible for charging VAT to UK customers on all products shipped from the fulfillment center, regardless of value.
U.S. merchant must:
- Register for VAT in the UK.
- Pay duty and VAT upon import to the local customs.
- Invoice for the products for 0 value to the platform.
- Declare the imports and sales to the tax authorities, and they will refund the import VAT.
Return to Latest VAT News