Have VAT changes for online marketplaces levelled the playing field?
The 1st of January has come and gone and with it major VAT changes in the UK, which will impact competition from overseas sellers on marketplaces. Online Marketplaces are now required to collect VAT on all sales under £135 if a seller is not registered within the UK. This is regardless of whether the product is declared to ship from abroad or is placed in a UK fulfilment house.
So, have you noticed any difference in search position for your products. Potentially many overseas sellers who have been relying on shipping without getting caught by customs will suddenly have had their prices hiked by 20% now that the marketplaces are responsible for collecting VAT. Others, who have in the past correctly collected VAT may not yet have reduced their prices but marketplaces will still have hiked the cost of their goods by 20% so their pricing may well be uncompetitive.
These VAT changes should be good news for UK sellers as it levels the playing field and ensures that all sellers, regardless of location, will have VAT applied to their products sold on online marketplace. The only exceptions will be for products valued over £135 delivered from outside the UK, and for UK sellers below the VAT threshold. Let us know if you see significant changes in search placement for the categories you trade in.
Summary of 1st Jan 2021 VAT changes
- For imports of goods from outside the UK in consignments not exceeding £135 in value (which aligns with the threshold for customs duty liability), HMRC will be moving the point at which VAT is collected from the point of importation to the point of sale. This will mean that UK supply VAT, rather than import VAT, will be due on these consignments.
- The new arrangements will also involve the abolition of Low Value Consignment Relief, which relieves import VAT on consignments of goods valued at £15 or less.
- Online marketplaces (OMPs), where they are involved in facilitating the sale, will be responsible for collecting and accounting for the VAT.
- For goods sent from overseas and sold directly to UK consumers without OMP involvement, the overseas seller will be required to register and account for the VAT to HMRC.
- For sales of goods by overseas sellers, where the goods are already in the UK at the point of sale, we will move the responsibility for accounting for VAT from the overseas seller to the OMP that facilitates the sale.
- Overseas sellers will remain responsible for accounting for the VAT on goods already in the UK and sold directly to UK consumers without OMP involvement.
I can see why some people will celebrate it, but for someone below the VAT threshold, in the EU who has about 30% of orders to the UK, it only harms sales. I haven’t had any impact yet, but I suspect before long there will be a lot more domestic trade as a consequence, and it will only impede international sales.
I did have an email recently from a UK buyer who was unaware of the 20% import VAT. They’d bid on an auction before the 31st, only to see the prices shoot up afterwards. I suspect a number of UK bidders will be put off by the new measures, and those who are still blissfully unaware may leave negative feedback as a consequence.
It has levelled me DEAD flat,
My main supplier overseas is now NOT shipping to the UK as it is too much hassle to register/collect and account for UK VAT. I am trying to persuade them to do a minimum order amount of £135 making all future orders exactly the same as before (will enter customs as usual).
I have got 2/3 months left of stock, after that no idea.
Do HMRC really think the world will pander to their requirements?
LVCR has long been an issue , and one major player in my sector has abused this for years hence undercutting everyone all the time.
Am confused does this mean eBay sales sold in the UK to be shipped to France for example will have 20% vat on them.
Plus I have just arranged for a new supplier in the Netherlands my minimum order will be well over £135 so does this now not get charged VAT.
The loss of UK LVCR hasn’t “levelled the playing field” it has just handed all future matches to Amazon. The VAT advantage was all we had to be able to compete with them.
Up to 1st July 2021: Sales UK to FR can now exploit (“abuse” your word not mine) EU LVCR.
Under 22 Euro No VAT to charge (UK or FR).
22 – Euro 150 FR buyer should be charged FR VAT on import. No idea how well this will work
Over 150 Euro Buyer will have to pay FR VAT and any import duties.
After July 2021, if the EU don’t delay it again, EU LVCR will go and up to 150 Euro Seller will be responsible for charging FR VAT. Seller will be able to register in one EU country and declare/pay EU VAT for sales to all EU countries. Distance Sales limits are going as well.
Imports from EU: you will have to pay UK VAT and duties. If you are not registered for UK VAT you should have already been paying NL VAT so not a huge change apart from the red tape etc.
Good questions…. everyone is confused. Avoid reading HMRC website at all cost… accountant can’t even answer the questions…
You are able to register for VAT even if you trade below the threshold. It requires very little additional time when preparing accounts and of course you can claim back your input tax on virtually all purchases.
What’s not so simple is when marketplaces have to account for VAT when goods are sold on a ‘margin scheme’. Still working on that one!!
Onwards, ever onwards.
Very confused. Does this mean that as a non VAT registered UK seller on ebay if I sell items to EU and possibly non EU buyers then Ebay will add VAT on to my selling price?
Basically yes, eBay will show the price + 20% VAT, to those in the EU. If you’re on Paypal, they’ll pay you the whole amount, then will take the 20% off you later in fees.
Well Amazon always come out on top one way or another.
So basically LVCR ends in July 21 in EU unless it is under 22 Euros about £20.
Thanks for the help BTW….
eeerrr…. and how is the sender of the parcel PROVING to HMRC at the border/Office of Exchange that VAT has been paid on that particular parcel? Am I missing something here???
So how do customs know that import vat has already been paid on ebay items compared to non ebay?
I read above that If you’re on Paypal, they’ll pay you the whole amount, then will take the 20% off you later in fees. Is it the same with managed payments as I received an order to Ireland and the price including vat was charged and that same amount received in my account, so it looks like the customer was charged vat on the order?
I am just a consumer. Indirectly raw materials for manufacturing come from the far east. . It appears to me that our cost of living will go up 20% and the government will benefit so it’s just another way of taxing us!
This is a silly take on the whole ridiculous mess. This levels exactly zilch. The world of e-commerce does not have to do the HMCEs bidding and will simply boycott us as a customer or hike prices considerably. Vice versa, other countries now have the right to impose the same constraints on our produce exporters and direct them to register for VAT collection. I hear the EU is going to do just that. Tit for tat ends in tough tit for the little guy. We’re the little guy.