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.