Key takeaways 

• The low value consignment relief that currently allows goods with a value of £15 or less to be imported VAT-free into the UK is to be abolished.
• For goods imported into the UK in consignments not exceeding £135, UK VAT will be collected at the point of sale (instead of on importation). Sellers, not selling through OMPs, will be required to register and account for UK VAT on these sales and comply with new invoicing requirements.  
• OMPs which facilitate sale of goods will be responsible for accounting for the VAT due on the supply of imported goods under the £135 threshold, and on goods of any value where the goods are located in the UK at the point of sale and sold by an overseas seller (without a UK establishment) (the 'deemed reseller rules').
• A new reverse charge regime will apply to B2B sales of imported goods with an intrinsic value not exceeding £135, where a valid UK VAT ID has been provided by the customer.

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For further information and to discuss what this development might mean for you, please get in touch with your usual Baker McKenzie contact.

In depth 

Key implications of these rules for overseas sellers and OMPs include:

Overseas sellers

Goods located outside the UK at the point of sale

• The low value consignment relief is to be abolished, meaning goods of £15 or less that were previously able to be imported and sold VAT-free will be subject to VAT. 
• For goods located outside the UK at the point of sale, where the value of the goods does not exceed £135, VAT will be accounted for at the point of sale rather than on importation and a compliant VAT invoice will need to be issued. 
• Overseas sellers must register for UK VAT where they sell goods directly (without OMP involvement) to UK customers if the goods are:
  1. outside the UK at the point of sale; and
  2. imported to the UK in consignments not exceeding an intrinsic value of £135.
• Where the customer provides the overseas seller with a valid UK VAT number, the liability to account for VAT on the goods of an intrinsic value not exceeding £135 will switch to the UK VAT registered customer. 
• A simplified customs declaration will still be required for goods that do not exceed £135. Goods above this value will be subject to VAT and customs in the current way.
• Where goods not located in the UK at the point of sale are imported in a consignment exceeding £135, existing VAT rules on the importation of goods continue to apply.

Goods located in the UK at the point of sale

• For goods which are already located in the UK at the point of sale, the OMP is deemed to make the sale to the UK consumer where the seller is not established in the UK.
• In such cases, the overseas seller will be deemed to make a zero-rated sale to the OMP, giving it an entitlement to register for VAT in the UK and recover the VAT it has incurred on its import or purchase of the goods. 
• Where sales are made by overseas sellers of goods located in the UK which are not facilitated by the OMP, normal VAT rules apply and so UK VAT should be accounted for by the overseas seller.

Online Marketplaces  

Goods located outside the UK at the point of sale

• OMPs will be required to account for VAT on the sale of goods to UK consumers that they facilitate, regardless of where the seller is located, where the goods are located outside the UK at the point of sale and the intrinsic value of the consignment in which the goods are imported does not exceed £135 (subject to a few exceptions like for excise goods and goods from Jersey/Guernsey). There will be no import VAT for those goods; as above, the OMP will pay VAT on the sale rather than on import.
• The rules also apply to B2B sales of imported goods of an intrinsic value not exceeding £135, but where a valid UK VAT ID has been provided by the customer a reverse charge will apply.

Goods located in the UK at the point of sale

• For goods which are already in the UK at the point of sale, OMPs are only deemed to make the sale where the seller is not established in the UK.
• The overseas seller will be deemed to make a zero-rated supply of the goods to OMP at the point of sale to the customer, and may be required to VAT register to recover any VAT on the purchase or import of the goods.  
• OMP are not liable to account for VAT for B2B sales where the goods are already in the UK. In such cases, the normal VAT rules will apply.

Compliance

• Where the deemed reseller rules apply, the OMP is responsible for accurately calculating VAT due on the sale and could be subject to interest and penalties for any under-declaration unless the OMP can demonstrate that they have taken all reasonable steps within their power to ensure that the correct amount of VAT is charged.
• For any sales the OMP is deemed to make, it will be required to issue invoices and keep records for 6 years, and they will be required to share these electronically with HMRC on request.