Changes to UK VAT

The Taxation (Post-transition Period) Act (the Act) received Royal Assent on Thursday 17 December 2020. The Act makes changes necessary to implement the new VAT rules on sales of goods moving into and out of the UK from 1 January 2021 as summarised in Her Majesty’s Revenue and Customs (HMRC) guidance, “Changes to VAT treatment of overseas goods sold to customers from 1 January 2021” of 3 December 2020 together with other changes affecting Northern Ireland.

In summary:

  • The GBP15 Low Value Consignment Relief on imported goods will cease to apply. VAT will be due on all consignments of goods arriving into the UK (including Northern Ireland).
  • Most overseas sellers selling goods located outside the UK at the time of sale valued at GBP135 or less will now have UK VAT obligations.
  • Online Market Places (OMPs) that “facilitate” sales of goods will broadly be responsible for the collection and payment of VAT.

The new rules
From 1 January 2021, the VAT treatment of sales of goods by non-UK established sellers (i.e. sellers established abroad for example, in the EU27, US, China etc) will be treated as follows:

Direct Sales by non-UK established sellers where goods are outside the UK at the time of the sale

Direct sales to UK consumers (B2C sales consignment less than GBP135)

Non-UK established sellers must charge UK VAT on their sales to UK customers at the point of sale and will have ongoing VAT compliance obligations (VAT invoicing, VAT returns, VAT payments). There is no minimum VAT registration threshold for non-UK established sellers.

For more details, please refer to Changes to VAT treatment of overseas goods sold to customers from 1 January 2021.