There are special VAT rules in place for online sellers who are classed as non-established taxable persons (NETPs), and use an online marketplace (such as Amazon) to sell to customers in the UK.

In this article we explain what NETPs are, and what this might mean for VAT if you’re an online seller.

Someone is considered to be a non-established taxable person (NETP) if they:

• Are not normally resident in the UK for tax purposes
• Operate a limited company, but it’s not registered in the UK
• Do not have a UK establishment

Some of these terms can be quite confusing, so we explain what ‘normally resident’ and ‘UK establishment’ mean in more detail below.

Am I normally resident?

Your residency status is based on how many days you are ‘resident’ in the UK during the tax year (from 6th April to 5th April). Your status might change from one year to the next, but you’ll be considered ‘not normally resident’ if you:

• Spend fewer than 16 days in the UK during the tax year, or 46 days if you were not considered normally resident in the previous 3 tax years
• Work an average of at least 35 hours per week abroad, and spend fewer than 91 days in the UK (of which fewer than 30 days are spent working)

What does having a UK establishment mean for VAT?

Goods and services ‘supplied’ in the UK are normally subject to UK VAT (unless they’re exempt from VAT), but it can sometimes be tricky to work out the place of supply if it crosses the UK border.

The ‘establishment’ rules are important because they help decide where a supply takes place for VAT purposes, which helps us understand if UK VAT should be charged.

Do I have a UK establishment for VAT?

Your business has a UK establishment if:

• Essential decisions about managing your business and its central administration take place at a location in the UK. In HMRC terms this usually means your head office, or where board meetings take place.
• It has a permanent physical location in the UK with both the human and technical resources it needs to make or receive taxable supplies
• The business is incorporated as a UK company and can make or receive supplies at its registered office

If your business doesn’t satisfy those conditions, then it’s not a UK establishment.
 

VAT rules can be very complicated, so it’s important to read all of this section.

A business normally only needs to register for VAT in the UK once its taxable turnover reaches the £90,000 registration threshold in any 12 month period, but this threshold only applies if you’re ‘established’ in the UK.

If you’re classed as a non-established taxable person (NETP) and you supply goods or services to the UK, then you might need to register for UK VAT, even if you trade below the registration threshold.

We say you ‘might’ need to register, because this depends on how you actually supply goods or services to your UK customers.

If you’re an online seller, and you only supply goods and services to the UK through an online marketplace (such as Amazon, eBay, or Etsy), it’s the marketplace that must register for VAT and account for the VAT on your sales – not you.

Unfortunately, there are cases where the VAT wasn’t collected by Amazon at the right time. As a result, the platform is withholding some sellers’ disbursements until they send Amazon the VAT amount which Amazon should have collected.

Amazon have contacted some online sellers who they’ve identified as non-UK established for VAT purposes, so you might have received a notification asking you to confirm your UK VAT status.

What should I do next?

Amazon are sending instructions to any affected sellers, explaining what they should do next. If you receive one of these communications – don’t ignore it! For example, you might need to provide additional documents to prove your VAT residence status, or request a VAT refund from HMRC.

Whatever happens – let your accountant know.

If you deal with multiple online marketplaces, then it could be helpful to contact them separately about any obligations or processes they might ask you to follow.

Can I ask someone to help me?

You can ask your accountant for help if you need support requesting a VAT refund from HMRC.

As a non-established taxable person (NETP) you can also appoint a tax representative who can keep VAT records and account for VAT on your behalf.

 
A key difference between your accountant and a tax representative is that a representative shares your liability for any VAT debts you incur – unlike an accountant who doesn’t. If you do decide to appoint a representative – let your accountant know!

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