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Introduction

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In addition to the sale of goods in the traditional way via shops, goods are now sold to a much greater extent through online market places or platforms such as Amazon.  As such there are rules around how and who should account for VAT when the sale of goods is facilitated through the use of such platforms or market places. 

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What is an Online Market Place

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HMRC's definition an online marketplace is a business using a website or mobile phone app (such as a marketplace, platform or portal) to handle the sale of goods to customers which meets all of the following conditions:

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• It in any way sets the terms and conditions on how goods are supplied to the customer

• is involved in any way in authorising or facilitating customers’ payments

• is involved in the ordering or delivery of the goods

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A business will not be classed as an online marketplace if it only provides one of the following services:

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• Processing of payments for the supply of the goods to the customer

• Listing or advertisement of goods

• Redirection or transferring of customers to other websites or mobile phone apps where goods are offered for sale, without any further involvement in any sale that might take place on that website or app

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UK Businesses Selling on Online Market Places

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UK businesses selling through online market place platforms must register for VAT where taxable sales exceed £85,000 and account for and pay the output VAT collected over to HMRC as part of their VAT return submission.  The online market place business will be responsible for sharing the customers VAT registration number with the seller if the customer is a business customer.   

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You can register for VAT online or by post using a VAT1.

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Non UK Businesses (Overseas Seller) Selling on Online Market Places

 

An Overseas Seller as defined by HMRC is an overseas seller that sells goods stored in the UK to UK customers and do not have a business establishment in the UK.

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A business is established in the country where the functions of it's business’s central administration take place. That is where essential management decisions are made,  Where your registered office is located and management meetings take place.

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You are also an overseas seller if you’re based outside:

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• The UK and sell goods to customers in Great Britain (England, Scotland and Wales), then import them into Great Britain

• The UK and EU and sell goods to customers in Northern Ireland, then import them into Northern Ireland

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Goods Sold by an Overseas Seller (using an online market place) That are Outside the UK at the Point of Sale

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• Where the consignment of goods are valued at £135 or less, the online market place will be responsible for charging the customer VAT and declaring this to HMRC.  Therefore the online market place must be registered for VAT, understand the nature of the goods so that they can determine the correct VAT rate to apply and keep records of all sales.

• Where the sale of goods is to a UK business customer, the Online Market Place will not need to charge the customer VAT so long as the customer provides a VAT registration number and the online market place verifies the VAT number.  The online market place can then write the words "Reverse Charge Applies Customer to Account for VAT to HMRC" on the invoice.  The customer will then be responsible for declaring the VAT under the Reverse Charge Mechanism.  Where the goods are supplied in Northern Ireland the business customer will be responsible for accounting for any VAT due. They may account for it using postponed VAT accounting or any other means of paying import VAT.

• Where the consignment of goods are valued at more than £135, Normal VAT and customs rules will apply on importation of the goods into Great Britain from outside the UK or into Northern Ireland from outside the UK and EU. The overseas seller will remain liable for any import VAT and Customs Duty when the goods are first imported into the UK.

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Goods Sold by an Overseas Seller (using an online market place) That are in the UK at the Point of Sale

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Where goods are imported the overseas seller will remain liable for any import VAT and Customs Duty when the goods are first imported into the UK.  Overseas sellers who are registered for VAT, can reclaim any import VAT they had to account for when the goods were first imported into the UK.

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When the goods are sold to the customer, the overseas seller will be considered to have made a zero-rated supply of the goods to the online marketplace, known as a ‘deemed supply’. The overseas seller does not have to issue invoices to the online marketplace for deemed supplies that are considered to be zero-rated.  UK VAT will be charged at the point of sale.

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The online marketplace will be liable to account for the VAT on the sales made through its marketplace by a seller not established in the UK. Where the goods are located in Northern Ireland at the point of sale and sold to a customer in Northern Ireland, the online marketplace will be liable for the VAT where the seller is not established in the UK and EU.

 

The seller remains liable for the VAT where the goods are for a business customer who gives them their VAT Registration Number. 

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Goods Sold to UK VAT Registered Businesses

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The online marketplace should pass on all the details of the sale (which should include the VAT registration number of the business) to the seller on the marketplace. The seller must register for VAT if they are not already registered. They will be liable to account for the VAT on the sale.

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Checks Online Market Places Must Make

 

Legislation allows HMRC to hold you as the operator of the online marketplace jointly and severally liable for unpaid VAT where:

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• An overseas seller operating on the marketplace should have registered for UK VAT and has failed to do so

• The online market place knew or should have known that an overseas seller should be UK VAT registered

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​Note: The on line market place can also be held jointly and severally liable if HMRC informed them that a seller operating on the marketplace is not meeting its VAT obligations.

 

It’s The online market places responsibility to check when an overseas seller needs to be registered for UK VAT. If they fail to do this, they could be liable for any unpaid VAT.

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If it is believe that an overseas seller should be paying UK VAT, you should check:

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• That they have a valid VAT Registration Number (VRN)

• The location of the seller

• The location of the goods that will be sold by the seller

• If the seller, or those directing the seller, have been removed from your online marketplace before

• How quickly the seller is able to fulfil orders from UK customers

• If there’s any information that the seller, HMRC or a third party gives you that might indicate dishonest conduct or failure to meet their VAT obligations

 

You should request a VRN when you think a seller offering goods for sale on your marketplace should be registered for UK VAT.

It’s up to you to validate the VRN of a seller operating on your marketplace within 10 days of receiving it.

 

You can check a UK VAT number. Registrations are updated every day.

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