UK VAT Regulations.
The UK has changed its VAT and customs rules from January 1st 2021. Sellers will need to be aware of these changes and make arrangements to ensure compliance with the new rules.
ShineOn is not authorized to provide tax advice, and provides this information as a starting point for your consideration of how changes to UK regulation may affect you. Refer to reputable tax advice services or certified accountants for more information.
Because Etsy is a marketplace, VAT on sales to the UK from outside the UK are handled by them directly. The information below does not apply as Etsy already handles this for you. You can find more information about this here.
New Rules in Brief.
Regardless of which country you are selling from, if you are selling into the UK, you will be required to collect VAT.
This applies to any business selling to customers in the UK, where the cart total is below £135.
20% VAT rate applies to the total cart value: cost of goods, shipping, and any insurance.
You as the seller collect 20% VAT on each of these orders at checkout, then you remit or pay taxes to HMRC quarterly.
Because all online sellers must collect the VAT at checkout, customers will not be charged customs fees before delivery.
When customer cart exceeds £135 total, the VAT should not be collected at checkout. Customers will pay this before delivery directly to UK Customs/Royal Mail.
Unlike the previous rules, there is no longer a lower "tax free" allowance (previously £15 per package).
What This Means for ShineOn Sellers.
If you are selling via Shopify, You'll need to register with the UK tax authority (HMRC) to collect VAT: https://www.gov.uk/guidance/register-for-vat
You'll need to enable UK VAT in Shopify Taxes settings from Jan 1st 2021
You'll need to setup remission (payment) of collected taxes to HMRC quarterly
ShineOn may request your VAT registration number in the near future to ensure compliance and to continue shipments to your UK customers.
Customers of ShineOn.com (Platform) will be charged VAT at checkout from Jan 1st 2021. This will not change the profit calculation for sellers.
- Shopify: https://help.shopify.com/en/manual/taxes/eu/uk
- Avalara: https://www.avalara.com/vatlive/en/vat-news/uk-post-brexit-vat-on-e-commerce-b2c-imports.html
- Register for UK VAT:https://www.gov.uk/guidance/register-for-vat
- UK Government publication on changes:http://gov.uk/government/publications/changes-to-vat-treatment-of-overseas-goods-sold-to-customers-from-1-january-2021/changes-to-vat-treatment-of-overseas-goods-sold-to-customers-from-1-january-2021