From 1 January 2021 there will be changes to the VAT treatment of low value consignments (LVC). These are goods with a value up to £135 – the threshold for customs duty liability. The HMRC guidance states that VAT will be collected at the point of sale rather than on import.
The changes are intended to 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.
Brief summary
- LVC Relief, which relieves import VAT on consignments of goods valued at £15 or less will be abolished
- Online marketplaces, where they are involved in a sale, will be responsible for collecting and accounting for VAT
- If no online marketplace is involved, the overseas seller will be required to register in the UK
- LVC B2B sales will be subject to the new rules. However, where the business customer is VAT registered in the UK VAT will be accounted for by the customer by a reverse charge
- Although the new rules mean that there will no longer be any VAT to collect at the border, Customs declarations will still be required at import, although these will be simplified
- For goods imported by UK VAT registered businesses which are not covered by the provisions will be able to use postponed VAT accounting
- Sales made by persons who are not in business are outside the scope of the new measures. This includes gifts and consignments sent from consumer to consumer