With the UK been given a six-month extension to leave the European Union, a no deal could still every much be on the cards. If the United Kingdom (UK) leaves the European Union (EU) without a deal, the UK import VAT rules will change for goods sold to UK buyers that are sent in parcels. The changes will affect the rules for reporting and paying UK import VAT and will impact sellers outside the UK.
Current rules while the UK is in the EU
Under the existing rules, parcels imported into the UK from the EU are not subject to import VAT. For imports from non-EU countries, the goods are subject to import VAT unless they are covered by low value consignment relief, currently £15 or less per packet.
Rules after the UK has left the EU
The rules differ depending on the value of the goods in the parcel. Low value consignment relief is withdrawn.
- Parcels with a value of £135 or less
Sellers outside the UK sending parcels to the UK where the value for all goods in the parcel is £135 or less, must pay the UK import VAT for any parcels sent to UK buyers after the UK leaves the EU. This includes the situation where goods were sold before the UK leaves the EU, but not sent until after. Sellers outside the UK include those in the EU, those outside the EU and the Channel Islands.
For the Isle of Man (IOM) and UK, VAT is treated as one, so VAT will have been charged by the IOM supplier, where appropriate.
This will include any goods worth £15 or less as they will no longer be eligible for the existing tax relief.
VAT will only be applied where the goods being purchased would be subject to VAT if purchased within the UK.
- Parcels with a value of more than £135
When the value for all goods in the parcel is more than £135, UK buyers will need to pay the UK import VAT and any customs and / or excise duty on these goods. The parcel operator will apply any necessary charges to the parcel and seek the payment direct from the UK buyer. For excise goods – import VAT, Customs and Excise duty is due regardless of value, and will be collected directly from the UK buyer by the parcel operator.
If sellers outside the UK sell goods above and below the £135 threshold to UK buyers, the seller should only report and pay the UK import VAT on parcels containing goods worth £135 or less .
There will be two ways for sellers outside the UK to pay the UK import VAT. HMRC’s new online parcel registration service is open and overseas businesses are encouraged to register now and get their parcels reference so they are ready to use it if the changes are introduced in case of no deal. Alternatively, they can pay a parcel operator that offers a service to pay the UK import VAT to HMRC on the sellers’ behalf.
If sellers do not follow the new UK import VAT rules, parcels may be delayed or stopped from entering the UK. In addition, the UK buyer may have to pay extra tax and fees, and the seller may have to pay a penalty of £1,000.
More information about these potential changes, or others in the event of the UK leaving the EU without a deal can be found at www.gov.uk/government/collections/import-vat-on-parcels. A communications pack on this topic is also available on GOV.UK.