Charging VAT when using an online marketplace to sell goods to customers in the UK
Find out if you need to pay VAT when you sell goods to customers in the UK using an online marketplace.
There are different rules if you:
- sell goods from the EU to customers in Northern Ireland, who are not registered for VAT in the UK
- move goods between Northern Ireland and the EU
Using an online marketplace to sell goods in the UK
An online marketplace is a business using a website or mobile phone app (such as a platform or portal), that allows third parties to offer goods for sale to customers and which is involved in all of the following:
- setting any terms or conditions on the sale of the goods to the customer
- processing or enabling customer payments
- ordering or delivery of the goods
A business is not an online marketplace if it only provides one of these services:
- processing of payments for the sale of the goods to the customer
- listing or advertisement of goods
- redirection or transferring of customers to other websites or mobile phone apps where goods are offered for sale, without any further involvement in any sale that might take place on that website or app
Check if you’re an overseas seller or established in the UK for VAT purposes
You’re an overseas seller if you:
- do not have a business establishment in the UK
- make taxable sales of goods to customers in the UK
A UK business establishment is a place where either the:
- essential management decisions and business’s central administration is carried out at a location in the UK
- business has a permanent physical presence with the human and technical resources to make or receive taxable sales in the UK
A registered, serviced or virtual office is not enough to create a business establishment. For example, if you sell all goods using an online marketplace and you only have a fulfilment centre in the UK, then you are an overseas seller.
Goods in the UK when they are sold
Importing goods to sell through online marketplaces
You will be liable for any import VAT and Customs Duty when the goods are first imported into the UK.
You can register for VAT to reclaim any import VAT you had to pay. The normal rules about what VAT can be reclaimed as input tax will apply.
When the goods are sold
The online marketplace will be liable for VAT on sales and will charge this when the goods are sold.
Where the goods are located in Northern Ireland at the point of sale and sold to a customer in Northern Ireland if you are:
- not established in the UK or EU, the online marketplace will be liable for the VAT
- established in the UK or EU, you will be liable for any VAT due
Goods sold to UK VAT-registered businesses
The online marketplace should pass on all the details of the sale to you. This should include the VAT registration number of the business.
If you’re an overseas seller you must charge and account for VAT. To do this you will need to:
- know the precise nature of the goods to find out the correct rate of VAT to charge
- register for VAT in the UK
- keep records of the goods sold, and make sure you get accurate information to apply the correct VAT treatment to them
If you’re established in the UK check if you need to register for VAT in the UK.
Goods outside the UK when they are sold
When the goods are sold
The online marketplace will work out the consignment value of the goods by deciding their ‘intrinsic value’. This is the total price the goods were sold for, not including:
- transport or insurance costs, unless they are included in the price and not separately shown on the invoice
- other identifiable taxes and charges
The individual values of all goods in the consignment will be added together to get the total value, unless sent individually.
Consignments valued at £135 or less
If the total value of the consignment is £135 or less the marketplace will charge and account for VAT.
There are different rules:
- for consignments of goods containing excise goods (this includes alcohol and tobacco products) — find out more about importing excise goods to the UK
- for consignments of goods from Jersey and Guernsey, if VAT is collected and paid to HMRC under the Import VAT Accounting Scheme
Goods sold to UK VAT-registered businesses
The online marketplace will not need to charge and account for VAT if the customer is a VAT registered business. The VAT registered business customer will be required to account for any VAT due instead.
The online marketplace should:
- request their VAT number and confirm it is correct using the check a VAT number online service
- add a note to the invoice (for example, by writing ‘reverse charge: customer to account for VAT to HMRC’) then send it to the UK business customer
VAT-registered businesses receiving goods bought on an online marketplace
If the goods are sold to a business customer in Great Britain, the business receiving goods should account for the VAT on their VAT return using a ‘reverse charge’ procedure.
If the goods are sold to a business customer in Northern Ireland from outside the EU, the business receiving goods may account for it using postponed VAT accounting or any other means of paying import VAT.
Wherever the goods are sold to the business customer they will be able to recover the VAT as input tax on the same VAT Return subject to the normal recovery rules.
Consignments valued more than £135
If the total value of the consignment is more than £135, normal import VAT and customs rules will apply.
If you make changes to the consignment so that its total value goes above £135 the consignment may be subject to import VAT and Customs Duty, and the online marketplace may have to adjust the VAT already accounted for at the point of sale.
Using an agent
If you choose to use an agent you must not give them access to your online account.
You can only have one person at a time as your agent (although an agent can act for more than one person or business).
If you choose to use an agent:
- you’ll need to give your agent enough information to allow them to keep your VAT account, make your returns and pay VAT on your behalf
- your agent must register with HMRC for an agent services account
You’ll need to give authority before we can deal with them. You can do this by:
Overseas sellers who do not comply with VAT requirements
As well as the normal penalties HMRC can charge you, they may also consider:
- directing you to get a VAT representative established in the UK
- asking you for a suitable security
If you still do not comply, HMRC can contact the online marketplaces you trade through to tell them that you are not meeting the VAT rules. The marketplace may decide to remove you from their site.
Online marketplaces can also remove you if:
- they know that you must be registered for VAT and you have not done so
- you have not given them a valid VAT registration number for your business
The Flat Rate Scheme
If you use the Flat Rate Scheme, any sales you make where the online marketplace or business customer is liable to account for the VAT, will not be included in the Flat Rate Scheme calculation.