Effective Jan 1, 2021, Value Added Tax (VAT) must be collected for all goods entering the United Kingdom. There will be a 20% VAT rate on goods valued up to £135, which the shipper must collect unless already collected by the online marketplace (Amazon, eBay, or Etsy). Current procedures for goods valued at over £135 remain the same.
**Taxes can be complicated and vary depending on your specific situation. While we provide information related to taxes in this post, we highly suggest you consult with your preferred international carrier, the marketplaces on which you sell, and/or a tax advisor/ tax software and compliance company such as Avalara about these changes.
Value-Added Tax (VAT)
Value-Added Tax (VAT) is a tax commonly assessed throughout the UK and the EU on goods originating from outside of the destination country. VAT can be applied to a product repeatedly at every point of sale at which value has been added. VAT is commonly expressed as a percentage of the total cost. For example, if a product costs $10 and there is a 20% VAT, the consumer pays $12.00 to the merchant. The merchant keeps $10 and submits $2.00 to the tax authority in the destination country.
There are several scenarios below, depending on how you sell and ship your products that will determine how to handle the UK VAT requirements for shipments valued up to £135.
Selling on an Online Marketplace
Online marketplaces where the sale takes place (such as Amazon, eBay, or Etsy) will be responsible for collecting and accounting for the VAT. In this case, the online marketplace becomes the supplier, not the shipper. So, the individual shipper won’t have to register and account for the UK VAT that is due. Check whether or not your eCommerce platform facilitates these payments. *Note: You will still need to enter the UK VAT number (assigned to Amazon, eBay, or Etsy) on your customs documentation and can contact your specific marketplace for this information.
When shipping using DDP-Delivery Duty Paid
If you ship DDP (Delivery Duty Paid), using a carrier such as FedEx, UPS, or DHL, you do not need a UK VAT number. Your carrier will bill you for the tax on a per-shipment basis. You may still need to collect the fees from your buyer upon checkout.
When shipping to a UK business with a registered VAT
Where business-to-business sales are made to a UK VAT-registered business, the business customer can provide a valid VAT number to the seller, and the customer will pay the VAT via a reverse charge. Depending on the carrier you are using you will need to enter the VAT ID in the Receiver Tax ID/VAT section.
If you do not fall into any of the above scenarios, you will need to collect the VAT fees from your buyer upon checkout. As the seller, you will need to register and submit the VAT to the UK’s HM Revenue and Customs Department.
Registering for a VAT Number
To prevent your UK-bound shipments from being delayed, held, or returned by UK customs it is recommended to take the following steps to obtain a VAT number.
Register for a VAT number with the UK: https://www.gov.uk/vat-registration
Collect VAT at the time of purchase.
Make quarterly VAT return payments to the UK.
Where to enter the VAT number in XPS Ship
Visit the Help Center link: VAT Number Field for International Shipments
Additional Resources
For more information visit the UK HM Revenue page: Changes to VAT
Do I need to be registered for VAT? Avalara VAT Risk Assessment tool
Requirements when exporting to the UK: Import and Export Process