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Drop shipping and UK VAT: The automatic obligation to register

Drop shipping to the UK? Take note: the UK has changed its rules for goods that are shipped directly to customers from outside the UK. According to the new rules, if goods located outside the UK worth less than £135 are sold directly to UK customers then VAT will be charged at the point of sale. 

That’s convenient for the customer, but it also has important legal implications for the seller. As the VAT charged is now UK supply VAT rather than import VAT, the seller is now automatically required to register for UK VAT. 

Drop shipping to the UK 

The regulations have particular relevance for drop shipping businesses that sell to customers in the UK. 

For example, suppose a customer in London buys a pair of running shoes priced at  £100 from an online sporting goods store. Those shoes are located in a warehouse in Bucharest at the point of sale. Under the new rules, the sales price includes VAT. The online retailer is thus obliged to register for UK VAT. The seller must also provide the customer with a VAT invoice at the point of sale.

Drop shipping via a digital platform

The scenario above refers to e-commerce suppliers selling through their own digital store. However, many online sales take place via an online marketplace (OMP), such as Amazon or eBay. 

UK authorities have instituted special rules governing the sale of imported low value goods sold through an OMP. In those cases, the marketplace itself must account for and manage VAT. In other words, the responsibility for accounting for VAT shifts from the underlying seller to the OMP.

How to calculate the consignment value

The £135 threshold refers to the value of the goods themselves. The threshold does not include additional costs such as transport and insurance.

Note also that the £135 threshold refers to the total value of the consignment, not to each individual item. 

Do you still need a customs declaration?

Goods that do not exceed £135 will not be subject to import VAT. However, normal customs procedures apply. You will require an EORI number and all relevant supporting documentation.

Get expert VAT assistance

Vatglobal’s e-commerce VAT specialists make VAT compliance easy. Get in touch with Vatglobal for complete clarity on all your VAT obligations. Our expert team will ensure you are always 100% VAT compliant, everywhere you have an obligation. 

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