Online marketplaces liable for UK VAT on overseas goods

Online marketplaces are liable for UK VAT on overseas goods sold to customers in Britain. HMRC has issued guidelines on VAT on overseas goods sold to customers in Great Britain through online marketplaces.

As of 2021, goods outside of Great Britain to the value of £135 or less that are sold in Great Britain will be subject to UK supply VAT. 

HMRC has clarified that in instances where those goods are sold through an online marketplace, the marketplace itself will be liable for the VAT.

In addition, if goods are located in the UK at the point of sale but sold by an overseas business via an online marketplace, the marketplace will be liable for the VAT.

Note that the guidelines apply to sales to customers in Great Britain only (i.e. excluding Northern Ireland). HMRC is due to release guidance on NI sales.

What is an online marketplace?

HMRC has defined an online marketplace as a website or app that: 

• “in any way sets the terms and conditions on how goods are supplied to the customer”
• “is involved in any way in authorising or facilitating customers’ payments”
• “is involved in the ordering or delivery of the goods”  (Source.)

Businesses that only process payments or that only advertise goods are not not considered online marketplaces.

Compliance requirements

To ensure compliance in the case of B2C sales of overseas goods worth less than £135 through online marketplaces, the marketplace must account for and charge VAT at the point of sale.

The onus is thus now on the marketplace to: 

• identify the nature of the goods and determine the correct rate of VAT
• register for VAT, if the online marketplace has not already done so
• keep accurate records of goods sold

Online marketplaces selling to customers in the UK are advised to take steps now to avoid regulatory issues in 2021. 

Any online marketplace that needs help understanding the intricacies of the new guidelines, or that would like to simplify the regulatory and administrative requirements, of VAT compliance is welcome to get in touch with Vat Global. Our expert team is on hand to provide full clarity on all VAT compliance requirements and regulatory changes.