Navigating the ever changing HMRC VAT rules can be very complicated. At AVASK, our highly experienced VAT compliance team already deal with hundreds of e-commerce sellers and vendors from countries including the USA, China, Hong Kong, Japan and Australia, as well as here in the UK , leaving you rest assured that your VAT matters are in capable hands.  Therefore, we have put together a  short document of FAQ’s to try to simplify the UK VAT process:

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Q: “What is the current rate of VAT in the UK?”

The standard rate of VAT in the UK is currently 20%. This rate applies to the majority of goods and services. Different rates may apply depending on the goods you sell, one of our VAT consultants can advise you on which rate applies to your business.

 

 

Q: “When do VAT returns have to be filed?”

VAT returns must be filed to the UK Government on a quarterly basis, or an annual basis depending on your chosen VAT scheme (usually quarterly basis). The deadline for filing VAT returns is 1 month 7 days after the period end date. For example, if your VAT period ended on January 31st, you return would be due to HMRC no later than March 7th. 

 

 

Q: “How is VAT calculated?”

VAT is calculated on 20% of your total sales price. For example, if you had a sale of £10 excluding VAT ,your gross sale price would therefore be £10 + £2,= £12 Therefore, we recommend that you mark your products up by at least 20% to cover the VAT element. The customer is the one paying the VAT, you are effectively working as a tax collector on behalf of HMRC.  Care must be taken when pricing your products so that you do not erode  your profits and be mindful of competitors.

 

 

Q: “Will I incur penalties / surcharges if I don't file on time?”

Yes. HMRC will issue penalties to you and place surcharges on your UK VAT account if you do not file on time. 

 

 

Q: “What information do you need to register my business for VAT?”

We have put together a separate document listing all the requirements we require in order to register your business for UK VAT.  Please contact one of our Tax Advisors.

 

 

Q: “How much do you charge for VAT registrations?”

Please see our fees in the homepage.

 

 

Q: “Do I pay VAT when bringing my goods into the UK?”

When your goods reach customs in the UK, you will have to pay import duty along with import VAT. However, the import VAT you pay at 

customs is fully reclaimable if you are on the standard VAT scheme through a C79 certificate. We offset this reclaimable amount against the amount of VAT you owe on your sales, thereby reducing your VAT liability.

 

 

Q: How long will it take to get my business VAT registered?

As HMRC are in a constant high demand for processing VAT registrations, this can take up to 14 days. However, VAT registrations are usually completed within a week, but should any extra information be required to complete the registration, the process could take around 3 weeks.

 

 

Q: “What VAT schemes would you recommend to apply for as an ecommerce seller?”

We would recommend registering on the standard scheme with a rate of 20%. However there is another scheme called the Flat Rate Scheme which may suit your business. When using the Flat Rate Scheme, your VAT returns are computed to a flat rate according to your business type. The current flat rate for businesses in retail is 7.5%, therefore the VAT owed on sales would be 7.5% rather than 20%. HOWEVER, although this may seem attractive, business on the Flat Rate Scheme cannot claim back any VAT paid on their purchases, meaning international sellers would not be able to reclaim import VAT. The flat-rate percentage is subject to change dependant on the business activities and could be applicable for a further 1% decrease in the first year of trading.

 

 

Q: “If I want to expand into other EU member states, will I have to register for VAT in each one?”

Providing that you ship your goods to the UK, your sales are fulfilled in the UK, and then sent to different EU countries from the UK, all VAT matters regarding each country can still be handled through the UK VAT system. However, if you decide to ship your goods directly to an EU country, you must then register for VAT in that country, as you will need a VAT/EORI number to clear your goods at customs. AVASK can assist you with VAT registrations in different EU countries. 

 

Note: Thresholds may vary, eg. Germany €100,000.

 

 

Q: What is an EORI number?

The EORI number -(Economic Operator Registration and Identification) is an EU initiative that helps traders communicate with customs officials when they are importing and exporting goods. It is specific to your VAT number/your company, and is used when clearing your goods at customs in European countries. When we register your business for VAT, we will also apply for an EORI number for your business. This comes at no extra cost. 

 

 

Q: “How can I get in contact with one of the members of your international VAT team?”

At AVASK our international team are easily accessible and are dedicated to assisting you no matter where you are situated in the world. We will work in accordance to your time zones, and can call you at a time convenient for you, saving you expensive international toll charges.  

Any enquiry will be answered within 24 hours of receipt. Alternatively, you can call our offices to speak to a member of our team 

between 8:00 - 19:00 GMT on +44 (0)1962 676 503, or +44 (0) 1962 676 231 or +44 (0) 2080 900970.

 

Q: “What is the difference between MFN and FBA?”

Prices and fees applicable for MFN sales (merchant fulfilled) are dealt with externally and are outside the scope of UK/EU VAT. What usually happens is the customer pays the VAT when the delivery of the parcel takes place, clients do not like this but there is not much they can do. So, when we compute the returns we exclude all MFN transactions. In regards to FBA sales (Amazon fulfilled) all sales must be disclosed to the UK government at the end of each VAT quarter. It is important to disclose all FBA sales to HMRC for accurate filing purposes. Our in house VAT systems are coded in such a way that the exclusion and categorization of sales is accurate.  For MFN sales, the pricing of the product is entirely up to the seller as they will not be accounted for in the VAT return.

 

 

Q: “What is the process of reclaiming import VAT?”

If the seller pays import VAT  for their shipments as long as their goods are sold in the UK/EU, this is fully reclaimable. Also, if they purchase any goods in the UK or EU that have VAT liability, they must keep the VAT receipt/invoice for the goods as this too is fully reclaimable. However, there is one exception for clients working under the VAT Flat Rate Scheme as they are unable to claim ANY VAT on their quarterly returns (except some capital assets worth over £2,000.00 which is unlikely that they will possess). To summarize, one can claim an import VAT provided he is collecting 20% VAT, whereas in the flat rate scheme, the import VAT cannot be claimed, however the seller retains 11.5% of the VAT collected from buyer and pays 8.5% to HMRC. Seller can price the products competitively and pass the benefit to buyer if the import VAT is less than 11.5%. 

 

Q: “What  taxes as a seller am I subject to pay?”

The seller will be subject to pay 2 different import taxes. The first being import VAT, which is paid at customs/the port of entry when shipping goods into the UK. This is fully re-claimable, providing the shipping courier/shipping  company clears the goods using the correct client’s VAT & EORI numbers. HMRC will then produce a  C79 certificate which is legal documentation enabling us to claim back the VAT paid at port of entry. The second tax payable is import duty which is calculated at the port of entry and solely based on the type of goods being imported to the country (goods classification) – the rate starts from around 5% to around 12% based on cost of import invoices supplied to the clearing agent at the port of entry.

 

 

Q: “Why does HMRC charge me VAT again for selling?”

VAT is not meant to be charged to the seller or business, but the seller needs to mark-up their merchandise by 20% so that it caters for VAT. It is not meant to corrode your profits – we advise that clients must have a sales matrix in order to produce a sensible pricing structure and yet keep their goods competitive. The seller acts as a tax collector on behalf of HMRC, which is payable at the end of each VAT quarter – sellers who calculate VAT on their products do not have a problem paying for VAT (the only problem where sellers have not engaged with a  qualified tax agent to advise on VAT matters). To sum up the statement: Please ensure that when pricing your products, you account for VAT and mark up the usual sales price by at least 20% so that the customer is the one paying the VAT you are simply acting as a collector for the UK Government. The amount payable to the government will be offset against the amount re-claimable from import VAT (if any) and then a total bill of the amount payable to or re-claimable from HMRC will be produced.

 

 

Q: “What documents do I have to submit to AVASK for the preparation of my VAT registration and compliance?”

For the VAT registration, clients will need to return all of the documents that we send to them, this includes the engagement documents, the VAT questionnaire (gathering all details for the registration) and they will need to provide the 3 evidence documents. During the process, it is possible that HMRC will require further information, at this point if necessary, we will contact the seller directly asking them to provide this. Once VAT registered, the seller will need to submit all shipping/VAT invoices to us on a monthly basis along  with an amazon sales report which we will provide details for on how to process. We have designed a form for registration together with the types of evidence required – the whole process will take a seller less than an hour to complete. 

 

 

Q: “How much do you charge for professional fees?”

Our fees at AVASK are shown here. These are subject to consultation and further agreement between two parties.

 

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At AVASK our international team are easily accessible and are dedicated to assisting you no matter where you are situated in the world. We will work in accordance to your time zones, and can call you at a time convenient for you, saving you expensive international toll charges.

 

Any enquiry will be answered within 24 hours of receipt. Alternatively, you can call our offices to speak to a member of our team between 8:00 - 19:00 GMT on:

 

 

+44 (0)1962 676 503 | +44 (0) 1962 676 231 | +44 (0) 2080 900970  

Disclaimer: 

The content of the FAQ is for general information only and does not constitute any form of advice or recommendation upon which a specific decision shoul be made. AVASK has done its best to ensure the accuracy but excludes any warranty expressed or implied to quality, accuracy, timeliness, completeness or fitness for particular purpose of this FAQ material. AVASK will not be liable for any claims, penalties, loss, damanges or expenses arising from the use or the inability to use the FAQ.

 

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