I want to set up overseas and sell to the UK: What are the VAT rules?

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I want to set up overseas and sell to the UK: What are the VAT rules?

Thinking about moving abroad, but don’t want to shut down your UK business? Already living overseas and thinking about trading in the UK? The good news is that you can trade with the UK from most countries around the world.

With Brexit looming and uncertainty surrounding the agreement and its terms, many business owners are considering moving their operations overseas. But the possibility of a no-deal brexit on the 31st October is causing a lot of questions – will the same VAT rules apply for overseas businesses if there’s no agreement?

We felt this would be a great time to clear up that confusion as best we can, and to look at the practicalities of this choice. In this blog post we’ll look at:

  • The current VAT rules (before 31st October) for businesses setting up in the UK from overseas
  • The VAT plans the government has in place for a no-deal brexit

What the VAT rules are now

Currently, VAT is charged on most goods and services sold within the UK and the EU. Businesses will pay VAT when they bring goods to the UK, but there are different rules depending on whether those goods come from an EU or non-EU country.

If you’re selling goods to the UK from an EU country, this is currently defined as distance selling. You are distance selling if you sell goods from an EU member state to someone in another EU member state who isn’t registered for VAT. This includes private individuals, some small businesses, VAT exempt businesses, public bodies, and charities.

If you’re selling to the UK from outside the EU, then distance selling doesn’t apply, but your customers may have to pay UK import tax and some duties on their goods when they arrive in the country.

What happens if there’s no deal?

If the UK leaves the EU without a deal, the government have said they will attempt to keep VAT rules as close to existing rules as possible. However, there are likely to be some changes:

  • Low Value Consignment Relief (LVCR) will no longer apply to goods entering the UK from EU countries. This means that goods entering the UK from overseas will be liable for VAT.
  • If the parcel is valued up to £135, businesses will charge VAT at the point of purchase, using a technology-based solution. This will mean overseas business will need to register with HMRC to use their digital service to account for VAT due, where they’ll be given a unique identifier to accompany parcels to the UK.
  • For parcels valued over £135, VAT will be collected in the same way as those sent from non-EU countries, where the sender will need to complete a customs declaration and the recipient will likely have to pay import VAT.

You can read the full details from the government on VAT for all businesses in the event of a no-deal Brexit here.

There are a lot of things to consider if you’re thinking about moving abroad or you’re already living overseas and thinking of trading in the UK. It feels like a vulnerable time to be making vital business decisions. But the best advice we can give is preparation before action. The plan you need to put in place will entirely depend on your business and how you’re planning trade.

Whatever the outcome of our exit from the EU on 31st October, we understand that what you want most is to feel in control.  Why don’t we have a chat about your specific situation and how Lloyd Piggott can help.