Changes to VAT treatment of overseas goods sold to customers from 1 January 2021

From 1 January 2021, VAT on imported goods with a value of up to £135 will be collected at the point of sale and not at the point of importation.

 New guidance has been issued by HM Revenue & Customs (HMRC) which outlines how it anticipates the import of goods from outside the UK below this value to be treated for VAT after the transition period ends. 

From the start of next year, the change on where VAT is collected will mean that UK supply VAT, rather than import VAT, will be due on consignments of £135 or less. Under HMRC’s new guidance rules, online marketplaces (OMP) that facilitate the sale of imported goods will be responsible for collecting and accounting for VAT, including when the goods are located in the UK at the point of sale.

If goods are sold and sent directly to the UK from overseas where a OMP does not facilitate the sale, then the overseas seller will be required to register and account for the VAT to HMRC. The rules also require overseas sellers to account for the VAT on goods in the UK when sold directly to UK consumers. 

Also, from 1 January 2021, UK VAT registered businesses will be able to account for VAT on imported goods in their VAT returns. Businesses in this category will be permitted to use postponed VAT accounting rules, allowing them to declare and recover import VAT on the same return, rather than making a payment upfront and being forced to recover VAT later. This change is subject to normal VAT recovery rules.

Further info can be found here.