Regular readers of this blog, as well as those of you who closely followed Brexit developments, will be aware that as of January 1 2021 Online Market Places (such as Amazon and eBay) have been given much greater responsibility when it comes to calculating and reporting VAT on all sales made to UK consumers. The EU will be implementing similar regulations from July 2021. This article will have a look at these new regulations in more detail and will also show you what this means for your cross-border ecommerce operations.
When Is An Online Marketplace Responsible For VAT?
There are a few golden rules to remember when answering this question. Firstly, Online Market Places (OMPs) are only responsible for accounting for VAT on B2C sales, not B2B sales. Whilst this seems redundant, since most sales made on OMP are B2C by nature, it is still worth noting to make sure you do not accidentally neglect to pay VAT on your sales.
Secondly, OMP VAT responsibilities only extend to sales that have a value of up to £135 when the goods are being acquired from overseas. This includes sales below £15, since the Low-Consignment Relief was abolished at the beginning of this year. This is because up until this value goods are not liable for import VAT, just sales VAT.
The value refers to the intrinsic price of the product and does not take into account the extended costs of the product, such as transport costs.
Thirdly, OMPs are responsible for the VAT obligations of all purchases under £135, regardless of whether the goods are stored in the UK or not, and also regardless of whether the seller resides in the UK or not. In fact, when the goods are stored in the UK OMPs actually have more responsibility, since they are responsible for collecting the VAT on all transactions, regardless of price.
What Is Specifically Meant By An OMP ‘facilitating’ a trade?
Online Market Places are electronic interfaces such as marketplaces, platforms, portals or similar that facilitates the sale of goods to customers. ‘Facilitating’ shall mean where any of the following conditions are met
- sets the general terms and conditions of the sale;
- authorises the charge to the customer for payment; and
- involved in ordering or delivering the goods.
A business which only provides one of the following will not be regarded as an OMP if:
- the processing of payments in relation to the supply of goods (e.g. PayPal);
- the listing or advertising of goods;
- the redirecting or transferring of customers to other electronic interfaces where goods are offered for sale, without any further intervention in the supply
The above description applies to Amazon, eBay, Bol and many more. In order for the OMP to correctly account for your VAT, they will need to know:
- Ship from country, where the seller’s goods where at the time of the sale
- If an import, the intrinsic value of the goods consignment to determine if not exceeding £135
- If the goods are within in the UK, whether the seller is non-resident
- If the customer is a VAT registered business entitled to zero-rating on imported goods not exceeding £135. In the case of non-UK seller domestic sale of any value, this should not be a deemed supplier transaction.
- Nature of the goods to determine correct standard, reduced or zero-rated VAT treatment.
Conclusion – Online Market Places & VAT
Whilst Online Marketplaces will not be responsible for collecting VAT on every transaction, it is clear their responsibilities have been increased greatly. Remember that their obligations do not extend to B2B sales or sales from overseas which exceed £135. Also, it is worth pointing out that whilst they now have to take on the responsibility for VAT, this does not extent to product liability, and thus you will still be responsible for the quality of your product and supply chain.
At J&P, we specialise in helping small businesses that use OMPs expand their business.
If you are a business who participates in cross border e-commerce through Online Market Places, we would be more than happy to help you register for UK & EU VAT, the UK VAT deferral scheme, EU and UK EORI number, file your UK & EU VAT returns, and help you comply with VAT in case your account faces any issues. At J&P, helping your business is our passion, and we understand that companies across the UK are at risk now more than ever. We are here to support you through Brexit and our long history of working with Amazon and eBay sellers means we can offer you expert advice, so please do not hesitate to give us a call on 0161 637 1080 or send an e-mail to enquiries@jpaccountant.com.
