2024 New VAT rules for e-commerce

We recently covered the new post-Brexit VAT guidance on overseas goods. Today we’re going to look at this a little more in-depth so you can better understand the ramifications for your e-commerce business.

Last-minute decision-making and delays due to COVID mean few e-commerce business owners feel clear and confident about VAT rules for e-commerce in 2024.

New VAT rules for e-commerce in 2024

In the 2023 Spring Budget, chancellor Jeremy Hunt introduced new changes to corporation tax and a range of other incentives to assist e-commerce retailers during the ongoing cost of living crisis. However, the chancellor failed to address VAT-free shopping and an extension of the reduced VAT rate of 12.4% that applied from 2021-2022.

Apart from this temporary VAT reduction, the VAT rate has been 20% on most goods, products, and services since 2011.

The VAT threshold in the UK for 2024 remains at £85,000 of a taxable turnover in any 12-month period. This threshold has remained unchanged since 2017 and will not change again until 31 March 2024.

While VAT rates and thresholds have stayed the same, there are new VAT rules that apply to imports and exports from and into the UK. These changes have been put into place in compliance with the UK-EU trade deal that was agreed at the end of 2020 due to Brexit.

These changes can be complicated, and the government recommends you hire a customs broker or accountant to help with VAT, import, and export changes.

Keep reading to learn more about the new VAT rules for e-commerce in 2024.

Importing to the UK

Many of you will be using products created in China or another country outside of the EU to supply your UK-based e-commerce store. If you previously imported under an EU EORI number, you will need to reapply for one that starts GB, and if you trade in or out of Northern Ireland, you will also require an XI EORI number. All imported goods into the UK must pay import VAT.

VAT rules on e-commerce

The e-commerce VAT rules depend on many factors such as consignment value, selling platform and your VAT status. To break it down:

• If your consignment value is less than £135 and is sold directly through your own website, will have a supply VAT charge at the point of sale.
• If the above is true but you trade in Northern Ireland, Import VAT will be charged on the same amount.
• If your consignment value is more than £135, standard VAT rules apply.
• If you are selling through a third-party platform such as Amazon, separate guidance applies. In most cases, the online marketplace will be responsible for collecting VAT.  We will be looking at the specific VAT rules for e-commerce sellers on Amazon in the coming weeks.
• Consignments of under £15 value are no longer exempt from VAT.

Non-VAT registered e-commerce businesses

If your e-commerce business isn’t VAT registered, you will still need to pay import VAT, but you will not be able to reclaim it. This new addition to the VAT rules for e-commerce may mean it is now beneficial for your business to register voluntarily. We will be happy to give you guidance about the best path for you. Find out more about how we can help you.

The UK has trade agreements with many countries. These can result in preferential rates or remove the need to pay VAT altogether. Check the specifics for each country you import from.

You can also delay declarations if you are not registered for VAT, meaning you will pay import VAT when you make your supplementary declaration.

Product journey

These are the basic steps following VAT rules for e-commerce based on a product coming from China to be sold in the UK outside of Northern Ireland:

1. You register for a GB EORI number if your current EORI does not start with GB.
2. You order your goods from your supplier who dispatches the items.
3. You work out the value of the whole consignment and the commodity code for the goods.
4. You confirm whether you are liable to pay import VAT and whether you are able to defer the payment.
5. The items arrive in the UK.
6. You enter your Customs Declaration and collect your goods.

You will need to keep a full record of all financial and VAT paperwork.

USA to UK

If you are importing from the USA, our current trade agreement means you are liable for VAT in the same way as you would be purchasing the goods in the UK. Value Added Tax will also need to be paid on anything being imported into the UK from the USA. This is in addition to import duty and will remain at the UK VAT rate at 20 per cent.

EU to UK

The VAT rules for e-commerce post-Brexit mean you will now be liable for VAT at the same rate as if you purchased the goods in the UK.

Whether it be for business or personal benefit, any purchases imported from the EU into the UK will be required to pay 20 per cent VAT. If goods are valued at more than £135, import duty must also be paid. Any gifts sent from the EU into the UK over £39 will also be subject to import VAT at 20 per cent.

Next Steps

VAT rules for e-commerce have undertaken some major changes and, until trade deals are finalised, you can be forgiven for feeling a little unclear. If you would like some clarity on your VAT obligations, please get in touch with our team of specialists.

The best time to act is now for ecommerce accounting.
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https://unicornaccounting.co.uk/blog/2021-vat-changes-on-overseas-goods/

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