New UK VAT model for cross-border low-value goods

This UK VAT model, effective from January 1, 2021, end of Brexit transition period, will largely mirror the E.U.'s that come into effect on July 1, 2021.

Jul 29, 2020

The UK has revealed a new VAT model for the cross-border sale of goods to UK customers. The new model is effective from the end of the Brexit transition period (i.e. January 1, 2021).

This new VAT model will largely mirror those of the E.U. which will also come into effect in 2021. The original introduction date for the E.U.’s rules was January 1, 2021, but there was a recent agreement to postpone to July 1, 2021.

So, what will actually happen on January 1, 2021? Firstly, the VAT due on UK sales via online marketplaces will be due at the point of sale, rather than the current rules that deem VAT to be collected at the point of importation. As a result, online marketplaces that facilitate cross-border sales to UK customers will be responsible for collecting and accounting for the UK VAT due on these sales for consignments below £135. In the case of consignments above £135 the collection will still be done at the customer level upon delivery of the goods.

Mirroring other global implementations

These rules also mirror the ones recently introduced on VAT collection on the cross-border sale of low-value goods in Norway, New Zealand and Australia with a much lower threshold. The relevant thresholds in these jurisdictions are as follows: Norway (circa £257), New Zealand (circa £520) and Australia (circa £555). It also follows the recommendation in the OECD report on the role of digital platforms on collection of VAT published in 2019.

One area that is interesting in the UK legislation that differs from those of other countries that have introduced low-value good rules is that it does not only focus on cross-border sales. On this point the UK follows the EU approach where the platform is liable for VAT paid on the sale of goods already in the country by a foreign seller. There is no consignment value threshold that applies. Platform liability is triggered despite the foreign seller having a VAT registration in the UK.

The UK’s motivation for this change is clear in their communication explaining the new VAT model. “This will ensure that goods from EU and non-EU countries are treated in the same way and that UK businesses are not disadvantaged by competition from VAT free imports. It will also improve the effectiveness of VAT collection on imported goods and address the problem of overseas sellers failing to pay the right amount of VAT on sales of goods that are already in the UK at the point of sale.”


Taxamo content is created for guidance only, please consult your local tax advisor.