The UK is one of the largest and most popular global markets. From the UK, the EU is easily accessible, and through close proximity to these lucrative markets, you have ample opportunity to expand and solidify your international business. However, with such fluctuation in legislation, tariffs and fees, keeping up to speed with all things VAT related is tricky but it’s a must! We’ve got you covered with our little helpful guide about selling to the UK and the EU for e-commerce retailers.
VAT in the UK and EU
The popularity of online shopping means Britain is an extremely attractive market for global e-commerce retailers. With over 60 million digital buyers in 2022, e-commerce is an essential industry for overseas companies looking to reach new customers. For EU and non-EU businesses looking to sell to the UK, understanding your VAT triggers and when registration is necessary is key. For UK and non-EU businesses interested in selling to the EU, VAT should also be an essential part of your expansion plan. VAT obligations for each business will differ depending on where you are based and where your customers are located.
In the last two years, EU and UK VAT has gone through many changes. From Brexit to the July 2021 VAT update, you may have felt discouraged from expanding into new markets. These changes, however, were made to aid e-commerce retailers and simplify the compliance process. Interested in getting set up in the UK and/or EU? You’ll need to know where your business stands with VAT compliance first.
Selling in the UK as an EU-based or non-EU based business
The VAT requirements for selling into the UK differ for EU and non-EU based businesses.
Cost of holding inventory
Holding inventory as a business will always trigger a VAT registration obligation. It will however vary depending on what platform you use to sell. Depending on where you hold inventory will determine what VAT charges are applied.
If you are holding inventory in the UK for sale via your own website
This action will trigger a VAT registration obligation as holding inventory creates a taxable supply. So that you can hold inventory within the UK, you would need to apply for a UK EORI number in order to get through customs.
When using your own website to sell to UK customers you will need to charge VAT at point of sale. Plus, when you import goods into the UK to be held for onward sale to UK customers, you will be able to reclaim this expense through your UK VAT return.
If you are holding inventory in the UK for sale via a marketplace
Holding inventory for sale via a marketplace will also trigger a VAT registration obligation. Often this will mean you are importing goods to be held at warehousing facilities.
When distance selling through a marketplace to UK customers, the marketplace will become responsible for charging and collecting VAT from the customer. However, you could keep your UK VAT registration so that you can reclaim import VAT when sending goods to marketplace warehousing.
Importing goods into the UK for sale via a marketplace or website
From January 2021, marketplaces were given additional responsibility in charging and collecting VAT on sales made to UK customers. So, for non-EU businesses using a marketplace to sell but import goods as and when, this will apply to you. When you sell goods to UK customers in consignments of less than £135 on a marketplace and these good