New e-commerce regulation in the UK

Due to the yearend increase of the e-commerce, our partner office in the UK has alerted us to some very important changes in 2021 in the context of e-commerce in the UK, which changes can effect many companies in the upcoming months. In this newsletter, we try to summarise the main elements of these changes in a brief and non-exhaustive manner.

In line with, and indeed in response to, the EU's new e-commerce tax package, the UK's internal VAT rules on e-commerce have been changed from 1 January 2021, in order to provide a transparent framework for foreign (mainly obviously EU) companies trading online in the UK and to ensure, as in the EU, that sales made through online marketplaces are taxed more effectively to protect the UK market.

Therefore, since 1 January 2021, the following two significant changes have been made in the UK in relation to online supplies to non-taxable customers ("B2C")

1. Direct B2C consignments of goods less than £135 delivered into the UK (if the goods are outside the UK at the time of sale)

Overseas suppliers are now required to charge UK VAT on their sales to UK consumers if the value of those goods is £135 or less. This means the overseas seller is required to registered for UK VAT unless the goods are sold through a market place, further on this below. Charging and payment of UK VAT will exempt foreign suppliers from payment of import VAT and customs duties in the UK.

For the sake of comparison, foreign companies above this threshold, - if they qualify as importers under the parities applied - must also register as taxable persons in the UK, but import VAT and customs duties should also be paid, and their supply to non-taxable UK customers, also subject to domestic VAT.

2. Goods sold through an Online Market Place (OMP)

Should instead an OMP facilitate a sale of goods to UK consumers or non-VAT registered businesses then the digital platform may be required to account for UK VAT on the sale. This will depend on where the goods are shipped from and whether the goods are valued at less than or more than £135.

Should you need further details on the above issues, experts of VGD involving our UK partner office will be at your kindly disposal.

23 Nov, 2021