The scenarios outlined in this article will apply to goods entering into Great Britain – if the goods sold to a business based in Great Britain do not exceed £135 in consignment value and the recipient of the supply of the goods is a VAT registered business in Great Britain.
Essentially, in the case of a European business selling goods to a UK VAT registered business (irrespectively of the means: Online Market Place or direct sale), the responsibility to account for VAT will be on the customer (buyer). The UK business will account for the transaction through the reverse charge procedure in its VAT return.
The reverse charge is a process whereby the customer accounts for the VAT due on a sale instead of the supply (will therefore pay VAT when the final consumer buys the good). The reverse charge is a simplification that removes the obligations for overseas suppliers to register for VAT in countries where there is a B2B transaction in place.
The UK business customer will calculate the VAT amount by adding the figure to both the VAT owing box (Output VAT box) and the same sum to the VAT reclaimed box (Input VAT box), thus will be able to recover the tax applied.
For example, a company sells and ships goods from Spain both through Amazon and its e-commerce to the UK-based VAT registered company. The value of the goods shipped is £120. In this scenario, the Spanish company will not be required to register for VAT and EORI in the UK, but it will have to specify on the invoice that, through reverse charge, the UK company should account for VAT in its quarterly return.
The situation is different when a UK business customer is not registered for VAT purposes and does not provide the seller with a valid business VAT registration number at the time of purchase. In this case, the Online Market Place or direct seller will have to treat the sale as B2C – Business to Consumer, rather than B2B, therefore, account for VAT accordingly.