Last updated: February 11, 2021
Is there a new VAT law in the UK and when did it become effective?
On January 1, 2021 the UK officially left the EU and began enforcing their own Import and VAT laws. The UK laws are significantly different than those currently in force in EU member states.
What is different about the new UK VAT law?
The new UK VAT law did two things:
1) it repealed the £15 low value goods provision which meant you could sell goods into the UK VAT free if the value was £15 or less. UK VAT must now be collected on sales of all goods up to £135; and most significantly.
2) it moved the point at which UK VAT is collected from the point of importation to the point of sale.
This means any seller wishing to sell goods into the UK with values up to £135, must collect UK VAT. Sellers who collect UK VAT must also register for a UK VAT ID, file regular quarterly VAT returns and remit the VAT collected to the HMRC each quarter.
Why do some Online Marketplaces (Marketplace Facilitators) collect UK VAT and some do not?
The new UK VAT law is very complicated especially as it relates to Online Marketplaces. The new law defines what an Online Marketplace is and also makes Online Marketplaces legally responsible for the collection of UK VAT.
Discogs currently collects sales-related taxes in regions where we’re legally responsible to do so. The new UK VAT law is very complicated as it relates to Online Marketplaces. It is not yet clear whether Discogs can be categorized as an Online Marketplace or Marketplace Facilitator under the new laws. However, due to the scale of this change and the added complexity it creates for sellers, we recognize the need for and are working toward a solution.
Can I still sell into the UK if Discogs does not collect VAT for me?
Any seller wishing to sell into the UK may do so. It is each sellers’ prerogative to utilize Discogs to sell into markets of their choosing.
If you are selling items whose prices are more than £135 or have individual orders with a total price that exceeds the £135 threshold, you do not need to follow the steps outlined below. Orders that exceed the new £135 threshold for point of sale application of UK VAT are not subject to the new UK VAT rules. As a result, you may continue selling and shipping these items the same way you have historically.
If you are selling items whose prices are £135 and under, you are subject to the new UK VAT rules and must follow the steps outlined below.
Step 1 in selling into the UK is to register for a UK VAT ID here. Once you receive your UK VAT ID, be sure to include it on any packages bound for the UK. This can be done by printing out the item and price overview of the order page, writing out your UK VAT ID, and including that on the exterior of the package.
If your buyer is also UK VAT registered, you must collect their VAT ID from them and write it on the documents accompanying the shipment so it is clearly visible to UK customs agents.
Step 2 is to apply for a UK EORI number. You may only apply for an EORI number after you have received your UK VAT ID. The EORI number is required to move goods between the UK and other countries. The EORI number is used in the process of customs entry declarations and customs entry. If you do not have an EORI number you may experience delays and increased costs associated with your shipments. Your EORI number must be clearly visible on the documents accompanying your shipments.
If you already had a UK VAT ID before Brexit occurred, the British government may have already issued you an EORI number. If you do not have an EORI number, you may apply for one here.
Step 3 is to add UK VAT to your Discogs selling prices. Adding UK VAT to your prices is the only way we can currently accommodate UK VAT in our sales transaction processing system. The UK VAT rate is 20%. Adding UK VAT would result in a 20% increase in your prices.
In the spirit of full transparency, adding UK VAT to your list prices means our Marketplace fee will be charged on the new VAT included price. We are not suggesting this route for selling into the UK to make more money. Rather, the steps outlined here are truly the only way we can help you sell into the UK at this time.
Step 4 is to file a full UK VAT return and remit the VAT collected to the HMRC each quarter.
We urge any seller who wishes to sell into the UK to consult with a tax advisor before doing so to ensure you can comply with all UK registration and reporting requirements.
What should I do if I don’t want to sell into the UK until Discogs has a UK VAT solution?
There is one simple step to discontinuing selling into the UK if you, as a seller, determine you no longer want to serve the UK market. You may eliminate access to your inventory by UK buyers by removing your UK shipping policies. Once your UK shipping policies are removed, your inventory will no longer be available to UK buyers.
Does Discogs have a plan to facilitate the collection and reporting of UK VAT for Discogs sellers?
We understand the new UK VAT law places a heavy burden for registration and tax reporting on you, our sellers and that taking on that burden is too much for many Discogs sellers. We also understand that if Discogs does not take responsibility for UK VAT for our sellers, the UK market will no longer be a viable option for you. Further, we know that for many Discogs sellers, the UK market makes up a significant proportion of your global sales volume.
Please know we are committed to finding a solution to the UK VAT dilemma we find ourselves in. We are actively working with tax advisors in the UK to chart a path forward and will keep you updated on our progress.
In the meantime, we both welcome your questions and appreciate your patience.
Is the 8% Marketplace transaction fee Discogs sellers pay for their use of the Discogs platform VAT taxable in the UK?
The 8% seller fee Discogs charges for the use of its platform is VAT taxable in the UK just like it is for sellers located in the EU. Under the UK VAT law, the seller transaction fee is considered to be an electronic service fee and, as such, is taxable to sellers resident in the UK if the seller is not VAT registered in the UK.
If you are an existing Discogs seller and are resident in the UK, the UK VAT ID in your seller settings will exempt you from UK VAT on your seller fees. If you are a new Discogs seller, you will be charged 20% UK VAT on your seller fees regardless of whether or not you are VAT registered. The reason for this is that we are currently unable to validate new UK VAT IDs entered in seller settings. We are working on a resolution to this matter and will update you once we know more. In the meantime, any UK VAT you pay related to your Discogs seller fees may be recouped when you file your quarterly UK VAT return.
If you are a UK resident seller, but are not UK VAT registered, Discogs will charge UK VAT on your monthly Discogs’ seller fee invoice. The current UK VAT rate for electronic services is 20%. Please be reminded that Discogs only charges the 8% seller fee on the actual selling price of the item itself, shipping is not included.
How do the new UK VAT laws impact buyers?
The new UK VAT law also impacts buyers. The most significant impact on UK resident buyers purchasing items from outside the UK is that the low value goods exemption of £15 was abolished and replaced by a new threshold of up to £135. This means any consignment of up to £135 will be charged UK VAT at the point of sale, unless you are UK VAT registered. Please note, the £135 threshold applies to the total value of the consignment including the price of the items and any shipping charges, not to each individual item or order within the consignment.
If you are UK VAT registered and you are ordering goods from sellers who are not resident to the UK or sellers who are resident to the UK, but the goods you are ordering are outside the UK, you must provide your UK VAT ID to the seller at the time you place your order. In this case, the seller will not charge UK VAT on your order, but you, as a VAT registered buyer will have to account for the VAT via a reverse charge. The value of the goods for VAT purposes is the actual price, including shipping, at which the goods were sold to you, the buyer.
If you are not a UK VAT registered buyer, there are no additional steps you need to take. It is the seller’s responsibility to correctly charge and collect VAT on orders you place.
Where can I find additional information about the new UK VAT requirements?
If you are interested in reading more about the UK VAT law and its impacts on your business, you may find more information here.