If the goods are already in the UK before being sold to the final consumer, new rules will apply for the tax treatment of the goods. This new provision refers to goods of any value in cases where:
- the goods are the property of the foreign supplier;
- the goods are present in the British territory at the time of sale (held in a warehouse for example);
- the supply is intended for a private individual, therefore, it is not intended for a company registered for VAT purposes;
- sale of goods to a customer in Great Britain through an OMP.
Goods located within British soil will have technically already been imported and will therefore have already passed customs procedures and any VAT applications. The foreign supplier, for example, will have already imported the goods into its warehouse based in the British territory and therefore already exported the products from the country of origin.
For B2C sales, UK VAT will also be paid upon completion of the sale. However, the difference is that, provided the four conditions above are met, the OMP will be considered the deemed supplier and will therefore be responsible for withholding and remitting VAT. However, this does not mean that the seller located abroad is exempt from VAT registration in Great Britain. Although the seller does not have to pay VAT, they will still need to include the value of the sale in their UK VAT return. It will be indicated as a VAT exempt sale to the OMP (therefore zero rated).
With regards to B2B sales in Great Britain (i.e. when the end customer can provide the British VAT number), the obligation to pay VAT falls on the seller located abroad rather than on the OMP. In this case, the usual VAT rules will apply, i.e. possible application of VAT on the sale. The OMP will have the obligation to notify the foreign seller and request the VAT declaration for such transactions. The OMP will be responsible for providing the UK customer’s VAT number to the overseas supplier.
If there is no involvement of the OMP and where the goods are located in Great Britain at the time of sale, it will be the foreign seller (who should already have a British VAT number) who will declare and apply VAT on such transactions.
Scenario 1
The XXX SPA company has a warehouse where it stores goods in the UK and is in possession of both the VAT number (VAT UK) and the British EORI. After having imported the goods and having paid the VAT on import (or after having chosen the postponed accounting method where the VAT is declared in the quarterly declarations) you will be able to sell the goods held in the British warehouse. If the XXX SPA company were to sell the goods directly to Mr Brown (individual resident in the UK) it will eventually have to add the VAT rate to the British invoice based on the product sold. If, however, the XXX SPA company were to sell goods to Mr Brown through Amazon, it will invoice Amazon and not Mr Brown with zero (zero rated) UK VAT. Amazon will then apply any UK VAT rate on the product sold to Mr Brown.
Scenario 2
The XXX SPA company has a warehouse where it stores goods in the UK and is in possession of both a VAT number and a British EORI number. After having imported the goods and having paid the VAT on import (or after having chosen the postponed accounting method where the VAT is declared in the quarterly declarations) you will be able to sell the goods held in the British warehouse. If the XXX SPA company were to sell the goods directly to YYY PLC (British company in possession of UK VAT) it will have to add the VAT rate based on the product sold. If the company XXX SPA were to sell goods to YYY PLC through Amazon, Amazon will be required to communicate YYY PLC’s UK VAT number to XXX SPA. Once the information has been obtained from Amazon, XXX SPA will then apply any VAT rate on the UK invoice for the product sold to YYY PLC.
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By: Michele Ammirati and Sergio Schittone
