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VAT on imported goods with a value of up to £135 will be collected at the point of sale, not the point of importation from 1 January 2021.
New guidance has been issued by HM Revenue & Customs (HMRC) which outlines how it anticipates the import of goods from outside the UK below this value will be treated for VAT after the transition period ends.
From the start of next year, this change on where VAT is collected will mean that UK supply VAT, rather than import VAT, will be due on consignments of £135 or less.
Under HMRC’s rules, online marketplaces that facilitate the sale of imported goods will be responsible for collecting and accounting for VAT, including when the goods are located in the UK at the point of sale.
If goods are sold and sent directly to the UK from overseas, then the overseas seller will be required to register and account for the VAT to HMRC. The rules also require overseas sellers to account for the VAT on goods in the UK when sold directly to UK consumers.
There will also be a change for imports of goods by UK VAT-registered businesses not covered by HMRC’s new guidance at the start of next year.
Businesses in this category will be permitted to use postponed VAT accounting rules, allowing them to declare and recover import VAT on the same return, rather than making a payment upfront and being forced to recover VAT later. This change is subject to normal VAT recovery rules.
Further details of the changes to VAT treatment on imported goods once the transition period ends can be found by clicking here.