What Happens If I’m VAT Registered and Sell Through an Online Marketplace?

VAT-registered businesses who use online marketplaces (for example Amazon, eBay and Etsy) may be confused over who collects the VAT and how. This guide explains how VAT works if you’re registered for UK VAT and sell goods on an online marketplace.

What counts as an online marketplace?

A platform counts as an ‘online marketplace’ if it sets its own sales terms and conditions, handles or enables payments, and is involved in the delivery of goods or services. HMRC doesn’t class the platform as an online marketplace if it’s only used to redirect customers, list ads, or process payments.

Who accounts for VAT if I’m already registered and sell through a marketplace?

Being VAT registered in the UK normally means you’re responsible for collecting and paying VAT on your UK sales. It can be a bit complicated if you sell through an online marketplace though, because sometimes it’s the marketplace that’s responsible for charging and accounting for VAT. Sometimes.

When does the marketplace need to account for VAT?

It all comes down to:

• Whether you’re a UK or overseas seller
• Where the goods are at the point you sell them
• Who’s buying them
• How much the consignment is worth

We’ll work through each scenario step-by-step below.

Am I a UK or overseas seller?

Working out whether you’re a UK or overseas seller is important because this can affect who’s responsible for dealing with the VAT on sales you make through an online marketplace – even if you’re already VAT registered.

There’s more to it than simply having a UK company registration, mailing address, or a virtual office – these alone don’t count as being ‘established’ in the UK. To decide if you’re ‘established’, HMRC will look at things like where the business makes decisions, whether you employ staff in the UK, and what other resources you have in the country.

If you don’t have UK establishment you’ll be considered an overseas seller – sometimes also described as being a non-established taxable person (NETP) for VAT.

Where the goods and the customer are when you make the sale

The next step is determining the location of the goods when they’re sold, and who is buying them, because this impacts whose responsibility it is to account for the VAT.

The goods are in the UK when they’re sold to a UK customer

This means the goods are already in the UK at the point when you sell them to a UK customer. The table below shows how the VAT works depending on whether you’re a UK or overseas seller.

If the goods are in Northern Ireland, and they’re sold to NI customers

It’s super important to remember Northern Ireland follows different VAT rules for goods. So, if goods are in Northern Ireland and sold to a NI customer:

• Sellers established in the UK and EU: Seller accounts for the VAT
• Sellers not established in the UK or EU: Marketplace accounts for the VAT

The goods are outside the UK, and you’re selling to a UK customer

Things are a little more complicated if the goods are overseas and being sold to a UK customer. In this case, it depends on the consignment value (the total value of goods shipped together, excluding delivery or insurance costs if these are shown separately).

Importing goods into the UK to sell through online marketplaces

You’ll be liable for any import VAT and Custom Duty when the goods are imported into the UK – but you can register for VAT and reclaim any import VAT you’ve paid. They’ll be treated the same as any other goods in the UK when you come to sell them.

VAT-registered businesses importing goods into the UK might also be able to use postponed accounting to deal with import VAT on goods worth more than £135.

Postponed accounting

Postponed accounting is literally just that – you postpone it. So, rather than paying import VAT at the border and then reclaiming it later when you submit your VAT return, you won’t pay anything at the border, and will instead just account for the charge and the claim all in one go on your return.

What happens if I don’t follow the VAT rules?

There can be serious consequences if you don’t comply with VAT rules, and HMRC could:

• Penalise you
• Ask for a deposit
• Tell marketplaces you’re non-compliant which means they may suspend your account

If you’re unsure on how to remain VAT compliant, you can authorise an agent to act on your behalf.

If you’re using the Flat Rate Scheme for VAT

It’s important that you leave out any sales where the marketplace or your customer (for example, because they’re a VAT-registered business) has to sort the VAT out themselves if you pay VAT using the Flat Rate Scheme.

This is because it’s not included in the Flat Rate Scheme calculation.

There are other types of VAT accounting schemes too, so contact an accountant for advice if you’re unable to decide which is best for your business.

Learn more about our online accounting services for businesses. Call 020 3355 4047 to chat to the team, and get an instant online quote.