With the Brexit process finally nearing its conclusion, the UK and the EU are set to overhaul their respective ecommerce VAT regulations in the early part of 2021. 

The changes will impact sellers and marketplaces alike, and are of vital importance to companies operating in the ecommerce arena. 

From 1 January 2021, VAT calculation and collections obligations will now fall on UK and overseas sellers, while online marketplaces will need to be responsible for VAT obligations for transactions for many third-party sellers. The aim is to reduce the prevalence of VAT fraud and simplify VAT compliance processes and obligations. 

The VAT ecommerce reforms focus on three main areas. 

The first is the removal of the £15 VAT exemption on imported goods being bought by UK customers.  

The second is that online marketplaces now have to take on VAT obligations of their third-party sellers who are outside the UK, or any imported sale exceeding £135. 

The third change is to charge sales VAT during the buying process for any imported sales that do not exceed the £135 mark. 

The changes are set to make it easier to clear the sale of imported goods in the UK, as well as putting UK retailers on an equal footing with European sellers thanks to the removal of the £15 VAT exemption. 

A similar set of reforms are set to come from the EU in July 2021. This will see retailers facing a further set of new EU import VAT and customs requirements.  

All in all, the various changes pose an additional challenge for retailers in what has already been a tricky period to negotiate. Those who get their head around what’s required and make any necessary preparations or changes quickly and efficiently stand to put themselves in the best position moving forwards. 

More information on the changes can be found in this guide from our partners Avalara.

Download 2021 UK Ecommerce VAT overhaul guide