If you run an online business and want to offer your goods to residents of the United Kingdom, you must be aware of and comply with the requirements of mail order sales to the UK. Concepts such as the 135 GBP limit or the EORI number should not be unfamiliar to you. So how should you account for sales, and what must you remember?
How to account for mail order sales to the United Kingdom?
As of January 1, 2021, mail order sales to the UK are treated as the export of goods. This means that you can no longer account for it under the VAT OSS procedure. Exporting goods to the UK is taxed at a 0% VAT rate.
What is more, you must have confirmation that the goods have been cleared for export (form IE 599). In the absence of the required documents, the sale should be taxed in the country from which it is dispatched – at the rate applicable to the type of goods. The method of settlement depends on such factors as:
- the value of the transaction,
- the method of sale – through an online store or sales platform,
- the buyer’s status – private individual or VAT taxpayer in the UK.
135 GBP limit for shipments to customers in the United Kingdom
Shipments valued at no more than 135 GBP are exempt from customs duties in the UK. When calculating the 135 GBP limit, it should be assumed that the transaction value:
- is the price due from the customer,
- is determined for the entire order,
- does not include shipping and customs fees.
Mail order sales to the UK: own online store or sales platform
You can sell your products to the UK in two ways: by using a sales platform – an online marketplace – or directly through your own online store. The platform will settle with HMRC on your behalf, whereas in the case of your own online store, you must register for VAT in the UK.
Selling goods to the UK through an online store
When selling through an online shop, you must register for VAT in the UK – it does not matter what your turnover is. Every sale that is taxable in e.g. Poland generates an obligation to register for VAT in the UK. The exception is if the purchaser is a UK VAT taxpayer – then you are not obliged to register. Also be aware of the GBP 135 limit when the purchaser is a private individual.
Mail order sales through a sales platform
Using a sales platform (OMP) generates additional obligations defined by UK regulations. Platforms are required to collect and remit VAT to HMRC – this applies to sales by entities without a UK establishment. Selling through a platform requires you to account for VAT as a sale to the OMP at a 0% VAT rate.
Note that for B2B transactions, the above solution does not apply. In this case, the seller is required to account for and pay VAT to HMRC. Similarly, sellers who store goods in the UK must also account for VAT in the UK.
What is an EORI number? When will you need it?
An EORI number is used to identify your business in the customs declaration system. You must obtain one if you plan to make mail order sales to the UK. It is required for any export of goods from the EU – without it, customs clearance will not be possible.
If you obtain an EORI number in an EU country you can use it to clear customs in any EU country, whereas if you want to clear customs in the UK, you will need to obtain a separate EORI in the UK.
Mail order sales to the United Kingdom and VAT
Sending goods from, for example, Poland to UK customers generates obligations under Polish tax law. When applying the 0% VAT rate, you must have confirmation of customs clearance.
If you do not have this document, ensure that you gather other evidence that clearly confirms the delivery of goods to the UK. Keep in mind that the lack of proper documentation may result in double taxation – both in Poland and in the United Kingdom.
Do you want to start selling to customers in the UK? Don’t go it alone!
You don’t need to own a company in the UK to sell goods to the UK – you can start a mail order business from another country. Given that the regulations involved in such a business are complicated, it is best if you use the help of a tax office.
This way, you will save not only time and stress but also money – the lack of proper documentation can result in financial penalties. In our tax office, we will assist you with all the formalities related to taxes, VAT registration, declarations, and tax optimization – ensuring that you operate legally and giving you more time to run your business!
