What is UK VAT? UK VAT Review

introduce

The full name of VAT is Value Added Tax. Its predecessor in the UK was "Purchase Tax". After the UK joined the European Economic Community (EEC) on January 1, 1973, it was officially changed to "Value Added Tax" in April of the same year. At that time, the ruling party in the UK was the Conservative Party, and the Chancellor of the Exchequer Lord Barber set a tax rate of 10%. Since January 4, 2011, the standard rate of VAT in the UK has increased from 17.5% to 20%.

tax rate

There are three main tax rates:

The first is the normal VAT rate, which applies to most goods and services and is 20%;

The second is a discounted rate, where some goods and services, such as car safety seats, and household energy, such as household electricity and natural gas, are taxed at 5%;

The third type is a zero tax rate, which applies to unprocessed food and infant clothing.

The tax rate for most cross-border e-commerce businesses is the standard VAT rate of 20%.

Tax calculation

VAT to be paid = sales tax VAT - import tax VAT

Sales tax VAT = market price/6 Market price = list price x1.2

Import tax VAT = (declared value + first-leg freight + tariff) x 20% (merchants can use it as a deduction when declaring quarterly)

Import tariff = declared value x product tax rate (the tax rate here refers to the tariff rate

Registration Process

1. The seller provides complete information;

2. The agency reviews the materials and submits the application to the tax bureau;

3. The seller receives the VAT tax number notification document from the tax bureau (within 2-5 days);

4. The seller receives the paper version of the VAT certificate (within three weeks);

5. The agency assists the seller in binding the VAT account;

6. The agency notifies the seller of the tax payment date in advance (every quarter);

7. The seller provides sales data for the current season;

8. The agency prepares a quarterly declaration form for the seller to confirm;

9. After confirmation by the seller, the agency submits the declaration for the quarter to HMRC;

10. The seller pays the tax for the quarter directly to the UK tax office account;

UK VAT is reported quarterly, four times a year.

Registration Information

The first step is to fill in the customer information form provided by OUYI. Please pay attention to the following points when filling in the important information on the application form.

①Company name and address must be consistent with those registered on Amazon;

② VAT effective date, which can be traced back to the start of operations in the UK;

③Whether to apply for FRS (Flat Tax Rate Scheme). If you meet the flat tax conditions, it is generally recommended to join and pay a fixed tax rate. Depending on the industry, most sellers pay a tax rate of 7.5% of sales. Those who join the flat tax rate plan in the first year can enjoy an additional 1% discount.

④ Clearly describe the platform and main products.

In the second step, the materials are divided into necessary materials and auxiliary materials. You only need to provide two types of auxiliary materials.

Compulsory documents List of necessary materials:

• Legal representative's passport

• ID card or driver's license of the legal representative (if no passport)

• Business license

• Business registration certificate (for Hong Kong companies)

• Screenshot of the company name and address on the Amazon system seller page

Optional Documents List of supplementary materials (two of them must be provided):

UK VAT Transfer Agent Requirements Information

1. VAT certificate

2. The last tax return receipt

3. Tax Agent Authorization

Scope of declaration

According to the European Distance Selling Regulation, goods shipped from UK FBA can be declared using UK VAT as long as they do not exceed the critical value. If they exceed the following critical value, you need to apply for the VAT of the local country.

1. Goods placed in the UK and sold to Germany, France, Spain and Italy can use UK VAT declaration. The threshold value for Germany cannot exceed 100,000 Euros, and for France, Spain and Italy it cannot exceed 35,000 Euros each.

2. Goods placed in Germany and sold to the UK, France, Spain and Italy can use German VAT declaration. The threshold value for the UK cannot exceed 70,000 pounds, and for France, Spain and Italy it cannot exceed 35,000 euros each.

How do I determine if I need UK VAT?

1. Direct mail from China to the UK: If the declared value is less than 22 euros, no VAT is required. If the declared value is higher than 22 euros, the buyer shall bear the corresponding VAT. In this case, the seller does not need to register for UK VAT.

2. If the goods are stored in the UK, such as FBA or other warehouses and engaged in related business activities, whether 2C or 2B, the seller must register for French Vat and complete the corresponding declaration according to the requirements of the French tax authorities.

3. If the goods are stored in other EU countries and delivered to individuals or businesses in the UK:

Amazon backend data download

First FBA calculation

Tax payment deadline

Legislative process

Starting from January 4, 2011, the UK VAT standard rate increased from 17.5% to 20%.

In September 2015, the European Commission urged member states to increase VAT collection and pointed out that platforms such as eBay and Amazon should be jointly liable for all unpaid VAT and illegal traders.

In November 2015, the European Commission announced that it would legislate to abolish the "tax exemption for low-value goods import" in 2016.

In February 2016, the British government discussed in Parliament the strengthening of VAT collection, targeting "Chinese sellers".

In March 2016, British Chancellor of the Exchequer George Osborne said in his 2016 budget report that if sellers evaded taxes, the government would hold platforms such as Amazon and eBay accountable.

In April 2016, Amazon UK required some sellers to submit VAT numbers before June 30.

On September 14, 2016, the new UK Finance Act came into effect, giving the UK HMRC greater powers to deal with overseas sellers who evade VAT.

In September 2016, AliExpress announced that sellers using overseas warehouses in the UK must pay VAT and register for a VAT tax number.

In January 2017, HMRC obtained new rights to review VAT, which may directly result in UK e-commerce platforms being jointly and severally liable for the VAT taxes of overseas e-commerce sellers on the platform.

In April 2017, Amazon conducted a random check on tax numbers. If a customer did not register for VAT or did not upload the VAT number to the Amazon backend after registration, their account would be closed!

In June 2017, many sellers on Amazon’s European site received news that they must fill in the VAT number on the UK site before September 30.

On September 13, 2017, the UK Parliament's Public Accounts Committee (PAC) held a hearing on VAT fraud on e-commerce platforms. PAC pointed out that in 2015-2016, e-commerce VAT fraud caused the UK government to lose 1 billion to 1.5 billion pounds in tax revenue.

On December 5, 2017, the European Financial Affairs Committee approved a VAT reform plan for e-commerce. The new regulations require large e-commerce platforms to ensure that non-EU companies pay VAT when selling within the EU, and cancel the previous regulations that exempted goods below 22 euros from VAT.

In February 2018, Amazon’s VAT service was launched to help merchants register for UK and German VAT.

In February 2018, the UK Finance Bill 2018 is expected to become law before March 2018. This proposed regulation stipulates that if a non-UK business that stores goods in the UK does not meet the UK VAT registration requirements, all online shopping malls must prevent the business from selling goods in the mall after discovering it.