I sell goods over the internet to both business and non-business customers all over the world. Do I have to charge UK VAT; or will I be liable to register for VAT in other countries?
The distinction between goods and services is an important one for VAT, as there are different place and time of supply issues. It is important to establish whether the business is providing goods or services or a mixture of the two. There is no significant difference between goods sold over the Internet and goods sold by mail order or telephone - normal rules apply.
A UK supplier should charge UK VAT on all UK sales and sales to unregistered entities and individuals in other EU countries. However, if a UK supplier exceeds the distance selling threshold for other EU countries, they will be required to register for and account for VAT in that member state instead of applying UK VAT. Sales to a VAT-registered customer in another member state should be zero rated, supported by evidence to show the goods have left the EU and the customer’s VAT registration number. The customer will account for acquisition tax in their own member state.
Goods sent outside the EU should be zero rated, evidence of export is required to support zero rating.
An EU supplier selling to individuals in the UK should account for output VAT in its own country.
Businesses that distance sell into the UK have to register for UK VAT if the value of their distance sales is more than £70,000 in a year. When selling excise goods like alcohol and tobacco then the EU seller has to register for UK VAT and Excise Duty no matter how much the sales are worth.
An EU supplier selling to a VAT-registered UK entity should zero rate the supply, with the customer accounting for acquisition tax.
When the supplier is based outside the EU, and has no business establishment in the EU, it is the customer who is responsible for accounting for import duty and VAT. This is collected by the Post Office or carrier when the goods are delivered, or by the courier company at importation.
Small value packages (currently under £15 - note that goods are valued by cost and not retail value) are VAT and duty free at import. Some businesses have used this as a way of avoiding charging VAT on sales, notably for CDs, films and printer cartridges, packing each item in its own packaging, which are often posted from the Channels Islands, always in separate packages. However, from 1 April 2012 the low value consignment relief does not apply to goods imported from the Channel Islands.
Our tax specialist can be contacted on 01455 852550 should you require any further advice.