From 1 January 2021, there will be major changes once the Brexit transitional period ends. New VAT procedures will apply to goods imported into the UK. The new procedures differ according to whether the value of the goods arriving in the UK exceed £135. Find out more here about how trading in goods post Brexit may impact you.
Less than £135
Goods that arrive in the UK from 1 January 2021 that have a value of less than £135 will be subject to ‘sales VAT’ rather than ‘import VAT’ if they are being imported by an overseas seller.
How does this work?
The overseas supplier is required to register for VAT in the UK. This supplier will then be required to charge UK VAT on all shipments into the UK which are less than £135 in value (final selling price charged to UK customer).
The supplier will be required to include a sales invoice with the shipment to ensure that all required Customs checks can be undertaken and evidence is held that VAT has been appropriately charged. No Customs Duty will be liable as £135 is the threshold for Customs Duty relief however a Customs declaration is still required.
What if the customer is registered for VAT?
If the UK customer is registered for VAT, the overseas supplier is no longer required to charge 20% UK VAT on the shipment if it is less than £135. Instead, if the customer provides a UK VAT number to the supplier, the customer in the UK will account for the VAT on its own VAT return by doing a reverse charge calculation.
More than £135
Goods that arrive in the UK from 1 January 2021 that have a value in excess of £135 will be subject import VAT and Customs Duty.
Import VAT in these cases should be accounted for by using postponed VAT accounting, which results in declaring and recovering import VAT on the same VAT return, rather than having to pay it upfront and recover it later, subject to normal VAT recovery rules.
Customs Duty may be applicable depending on the actual commodity code of the goods imported. The new UK Global Tariff will be effective from 1 January 2021 and can be found using the following link: https://www.check-future-uk-trade-tariffs.service.gov.uk/tariff.