Since Brexit, goods sold online to UK consumers carry UK import VAT rules that depend on the value of the consignment and where the goods sit at the moment of sale. US brands get caught by the 135 pound threshold most often. This guide explains the split and what to set up.
For a consignment of 135 pounds or less shipped from abroad to a UK consumer, the seller must charge UK VAT when the customer checks out, register for UK VAT, and pay it over through a UK VAT return. The parcel then crosses the border without a VAT bill for the customer, which is the experience British shoppers now expect.
Above 135 pounds, VAT is charged at import instead, either to the customer before delivery or handled by whoever acts as importer. Brands whose baskets straddle the threshold need checkout logic that knows which regime a given order falls into, because a single store can owe point of sale VAT on one order and not on the next.
When the sale happens through an online marketplace that facilitates it, the marketplace is usually the party treated as responsible for the point of sale VAT on low value consignments. Direct website sales leave the duty with the brand. Many US brands sell through both channels and assume the rules match; they do not, and the direct channel is where registrations get missed.
Goods already inside the UK when sold follow yet another path, with the marketplace or seller accounting for VAT on the sale itself rather than an import. Brands using UK fulfilment for the first time should map each of their sales routes separately instead of adopting one rule for the whole UK business.
Registering for UK VAT as an overseas seller is straightforward paperwork, but it creates an ongoing filing obligation and a need for records that connect each sale to the VAT charged on it. The customs declaration for each parcel also needs the seller's VAT details handled correctly, or parcels get charged twice and customers complain to the brand, not to the border.
Currency and valuation trip people up too. The 135 pound test uses the value of the goods in the consignment, and exchange rate timing can push a basket over or under the line. Checkout systems should fix the value used for the test at the point of sale and keep it with the order record.
The practical order is: work out which channels the brand will sell through, register where the brand itself owes the VAT, brief the carrier or customs agent on how declarations should show the VAT arrangement, and test with real orders at values just below and just above the threshold.
Brands should also write the customer facing version before launch. British shoppers abandon carts when delivery pages hint at surprise charges. One clear sentence about taxes being included at checkout for typical orders prevents more lost sales than any advertising spend aimed at the same audience.
Keep reading: Shipping to Mexico from the US: pedimento and customs basics for online brands, What should US brands know about selling to South Korea online?, and How does Brazil's Remessa Conforme program affect US brands selling online? cover the nearby cases in this series.
For goods shipped from outside the UK to a consumer in a consignment worth 135 pounds or less, UK VAT is charged by the seller at the point of sale instead of at the border. The seller, or the marketplace facilitating the sale, must be registered and account for that VAT.
Usually the marketplace takes responsibility for the VAT on facilitated sales of low value imported goods. Direct sales through a brand's own website leave the obligation with the brand, which is why the channels must be assessed separately.
VAT is handled at import in the traditional way, charged when the goods enter the UK rather than at checkout. Who pays and who can reclaim it depends on who acts as importer, which should be agreed with the carrier or customs agent in advance.
Yes. Overseas sellers can register for UK VAT without a UK establishment, though they take on UK filing deadlines and record keeping. Many appoint a UK tax agent to handle filings while keeping the registration in the brand's own name.