New VAT Rules on Low-Value Goods Imports
Do you import goods from overseas? If so, you’ll need to know about the recent changes to import VAT.
Low-Value Consignment Relief (LVCR) is a form of tax relief for import VAT. This relief ensured that businesses in the UK wouldn’t have to pay import VAT on goods with a value below £15.
However, the rules have changed since 1st January 2021. There are now different rules on VAT for shipments with a value below £135. Essentially, LVCR has been withdrawn.
In this article, we’ll cover the changes you need to know about and why they were implemented.
This article contains:
- Why have the VAT rules changed?
Who pays VAT now?
- When regular customers are the buyer (B2C)
- When businesses are the buyer (B2B)
- The rules for buying through an online marketplace
- What if a shipment is worth more than £135?
Why have the VAT rules changed?
The reason import VAT has changed is because of the UK’s exit from the European Union. Since the official Brexit date on 1st January, the UK is no longer under EU VAT rules.
This means that the rules regarding charging, collecting and paying VAT on goods or services that cross the UK border, have changed.
One of the main changes is regarding low-value imports coming into the UK. The new threshold for low-value goods is £135 rather than £15.
Who pays VAT now?
Another rule change is who is responsible for VAT. Who pays VAT depends on who the buyer is, and whether they are a business or a regular customer.
When regular customers are the buyer (B2C)
Business to consumer (B2C) imports are when a customer buys something from overseas for personal use.
The new VAT rules state that the customer must pay VAT at the point of sale if the shipment’s value is less than £135.
For businesses overseas selling to UK consumers, the seller must now register for UK VAT. They must also produce customs invoices to show that VAT has been paid at the point-of-sale by the customer. Without this, there will be delays for the goods crossing the border.
Unfortunately, the extra work and costs incurred for registering for UK VAT have put some sellers off from selling to UK customers.
When businesses are the buyer (B2B)
When a business buys goods from overseas, the seller won’t need to charge VAT on the sale, if these conditions are met:
- The buyer is a UK business
- The goods are bought by and sold from a business
- These goods are imported into the UK
- The goods are worth less than £135.
For business customers that are VAT registered, this sale must be accounted for as a reverse charge on your VAT return. On the other hand, if they are not VAT registered, they must pay import VAT at the border.
The rules for buying through an online marketplace
Another recent VAT change has altered the way VAT is paid when purchasing through online marketplaces such as Amazon. In this case, a regular customer will still pay VAT at the point-of-sale.
However, the seller won’t need to register for VAT, it’s the marketplace that must instead. This rule applies whether the goods are sold to customers or businesses.
What if a shipment is worth more than £135?
If a shipment is worth more than £135, it means that UK customers won’t pay VAT at the point-of-sale. Instead, they must pay import VAT and duty at the border.
In this case, sellers won’t need to register for UK VAT or even include it on their customs invoice. However, invoices must still clearly show that the shipment’s value is greater than £135.
If you need help figuring out VAT, or adapting to these changes, get in touch with Countplus Accounting today to set up a free consultation.