Changes to VAT on imported goods: HMRC introduces a new model

HMRC has introduced changes to the VAT on imported goods from 1 January 2021. The government will introduce a new model for the VAT treatment of goods arriving in Great Britain from outside of the UK.

The changes will ensure to treat goods from EU and non-EU countries in the same way. They will also ensure UK businesses do not disadvantage by competition from VAT-free imports.

From 1 January 2021, the government will collect VAT on imported goods with a value of up to £135 at the point of sale as opposed to the point of importation. This means that UK supply VAT rather than import VAT will be due on goods.

Online marketplaces(OMPs), involved in facilitating the sale of imported goods, 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.

Business-to-business sales not exceeding £135 in value will also be subject to the new rules. However, where the business customer is VAT registered in the UK and provides its valid VAT registration number to the seller, the VAT will be accounted for by the customer by means of a reverse charge.

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Where the changes to VAT on imported goods will not apply?

The changes will not apply to consignments of goods containing excise goods or to non- commercial transactions between private individuals. Existing rules will continue to apply for these transactions.

In addition, 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.

The changes also involve the abolition of Low-Value Consignment Relief. It relieves import VAT on consignments of goods valued at £15 or less.

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