Q: Are there any special rules that apply when selling goods on the Internet?

 

A; There is no significant difference between goods sold over the Internet and goods sold by mail order or telephone – normal rules apply.

A VAT-registered UK supplier should charge UK VAT on all UK sales and sales to unregistered entities and individuals in other EU states. However, if a UK supplier exceeds the distance selling threshold for another EU state, they will be required to register for and account for VAT in that state instead of applying UK VAT. Sales to a VAT-registered customer in another state should be zero rated, supported by evidence of the customer’s VAT registration and shipping of the goods from the UK – the customer will account for acquisition tax in their own member state.

Goods sent outside the EU should be zero rated, evidence of exports required to support zero rating.

An EU supplier selling to individuals in the UK should account for output VAT in its own country. However, if the EU supplier exceeds the UK distance selling threshold (currently £70,000), they will be required to register in the UK and account for output tax here.

An EU supplier selling to a VAT-registered UK entity should zero rate the supply, with the customer accounting for acquisition tax.

When the supplier is based outside the EU, and has no business establishment in the EU  but sell goods stored in the UK to UK consumers then they are required to register here as an overseas seller, there is a nil threshold for registration in these circumstances.

Charges for postage and normal functional packaging follow the overall liability of the supply, e.g. zero-rated for children’s clothing and standard-rated for adults’ clothing.  If the supply contains goods subject to differing rates of VAT an appropriate apportionment of the postage and packaging charge will be required.

Gift-wrapping is a separate supply of services, and is always standard rated.

 

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