As the world of e-commerce continues to thrive, venturing into new markets like the United Kingdom (UK) can offer lucrative opportunities for growth. However, there have been significant import regulation changes in recent years, particularly concerning value-added tax (VAT). As a brand looking to tap into the UK market, it’s crucial to comprehend the intricacies of VAT and the impact it has on your business. In this guide, we'll help you navigate through the UK’s current B2C import rules to ensure a successful cross-border selling experience.

What is VAT and How Does it Apply to E-Commerce in the UK?

In the context of e-commerce, VAT is essentially a tax imposed on the final consumption of goods or services by end consumers. Businesses selling to customers in the UK are required to collect VAT on eligible transactions and then remit this tax to the UK’s government tax authority, HM Revenue & Customs (HMRC).

UK VAT Rules for B2C Imports

Now that we’ve covered the basic concept of VAT and how it affects e-commerce transactions, let’s get into the UK's B2C import rules.

Here are the three major regulations you should be aware of:

• No More VAT De Minimis: The UK Government eliminated the previous de minimis threshold of £15 and now mandates VAT on all imported goods.

• Imports Not Exceeding £135: For orders equal to or less than £135, merchants are required to collect VAT at checkout and remit it to HMRC.

• Imports Exceeding £135: For orders over £135, you have two options: (1) You can still charge VAT to your customers at checkout and have your carrier remit it to HMRC when the shipment clears customs. (2) While we don’t recommend this second approach due to a poor customer experience, you can also ship orders Delivered Duty Unpaid (DDU), meaning that VAT won't be charged upfront. Instead, your recipient will need to pay it at the time of delivery.

Options for E-Commerce UK VAT Compliance

When it comes to UK VAT compliance for e-commerce, you’ll either need to register for your own VAT number or partner with a shipping carrier like Passport who can handle collecting and remitting VAT for your transactions. By utilizing Passport’s Seller of Record (SOR) solution, you can save time and money by avoiding complicated registrations and filings. This program allows brands to use Passport’s VAT number to clear shipments through the UK. Simply collect taxes at checkout from your UK customers and Passport will take care of VAT returns for shipments with the proper tax authorities.

Interested in expanding your business to the UK with Passport’s Seller of Record solution? Reach out to our compliance experts at vat@passportshipping.com.