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B2C Ecommerce sellers to the UK Required to Collect VAT on Consignments £135 or less

by Morgan Hardy on
Ecommerce Tax VAT UK

Hopefully exporters selling directly to UK customers have been aware that from 1 January 2021 UK VAT needs to be charged on consignments of £135 or less. Not collecting VAT could result in delivery delays or non-delivery.

The change arises from the removal of the low value consignment relief ("LVCR") that previously applied. This is not specifically Brexit related but the end of the Brexit transition period allowed the UK to introduce these measures. The EU has proposed similar rules to apply from 1 July 2021 for imports into the EU.

Removing the LVCR changes the process for collecting VAT on sales to UK customers. Previously, if the goods were outside the UK when sold, the customs border process was used for collecting VAT and duties (if payable). Following the law change relevant sales are considered sales within the UK for VAT purposes. 

This means:

  • Vendors must collect VAT at the point of sale. The standard rate of UK VAT is 20% but a reduced rate or zero rate may be applicable to certain goods

  • Vendors need to register for UK VAT

  • UK VAT returns will be filed (usually quarterly) and the VAT collected paid over

  • VAT returns need to be filed even if no relevant sales were made in the quarter

  • VAT deregistration is required to end the obligation to file returns if sales to the UK cease.

The new collection rules apply from the first relevant sale. The usual £85,000 turnover threshold that applies before UK businesses need to register for VAT does not apply for sales by 'non established taxable persons'. A non-established taxable person in VAT speak is a person that:

  • is not usually resident in the UK;

  • does not have a UK establishment; and

  • is not incorporated in the UK if they are a company.

As always, the devil is in the detail. If the consignment exceeds £135, VAT does not need to be collected at the point of sale. Rather the traditional customs process is used. Further, for B2B sales to a VAT registered business no VAT is charged and the purchaser would assess VAT under the reverse charge process. If the sale is being made through an online marketplace the marketplace operator will be obliged to collect and pay over the VAT.

A simplified customs declaration process is to be followed where VAT is collected at the point of sale.

As always it is important to keep your advisor in the loop to ensure you apply the rules specifically to your facts. If you hold a stock of goods in the UK to fulfill your sales the old rules will continue to apply. In this instance VAT will be chargeable on B2B sales.

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