New Value Added Tax (VAT) Arrangements for US Sellers Exporting to UK

December 10, 2020

Sellers exporting from the US to the UK should note that on January 1, 2021, a new model will go into effect for the VAT treatment of goods arriving into Great Britain from outside of the UK. The new arrangements will include the abolition of Low Value Consignment Relief, which currently relieves import VAT on shipments of goods valued at £15 (approximately $20 USD) or less. Sellers will also now be obliged to register for UK VAT and collect UK VAT on goods shipped to the UK with a value up to £135 (approximately $180 USD). The value of £135 excludes shipping and covers only the value of the goods.  Where a package is above £135, the buyer will have to pay import VAT. So, if a seller is exporting low value goods, they will have to factor in an extra 20% VAT to their price, unless the goods do not incur VAT (e.g. books, food, children’s clothes). 

The good news for sellers is that when online marketplaces like eBay are involved in facilitating the sale, they will be responsible for collecting VAT directly from buyers. This means for packages of £135 or less, eBay will be collecting the VAT from buyers at the point of sale and remitting it to the UK tax authorities. For shipments worth more than this, eBay will not collect the VAT, and existing customs rules will apply - i.e. the buyer will be responsible for paying import VAT.  More details on these changes can be found here.

Please note that US sellers who list on the US eBay site don't have to take any action. Sellers who list directly on the UK or EU eBay sites will see an added field in the listing flow to show a VAT % applied along with the gross (tax included) amount. Sellers should only enter a rate if they have included VAT in their price. Otherwise, sellers should enter 0%. As for all other sales made by US sellers where the goods are imported into the UK, eBay will add VAT - based on the final sale amount - for all shipping methods, including Global Shipping Program, International Standard Delivery and those packages that a US seller ships directly on their own.