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UK VAT for overseas sellers – How to stay compliant
Selling to UK customers from abroad is profitable but requires strict compliance with UK VAT rules. Many non-UK sellers lose time and money by misunderstanding how VAT applies to them. This guide helps overseas businesses understand when to register, how to comply with HMRC, and why using digital tools simplifies the process.
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When you must register for UK VAT
- You store goods in UK warehouses or fulfilment centres (such as Amazon FBA).
- You sell goods shipped directly to UK consumers worth £135 or less per order.
- You sell digital products or software to UK buyers.
- You operate through marketplaces that require VAT registration.
The £135 VAT rule
- If you sell through your own website, you must charge UK VAT during checkout.
- When selling through marketplaces such as Amazon or eBay, these platforms often automatically handle VAT collection for orders.
Do you need a VAT representative?
- If your company is based outside both the UK and the EU, HMRC may ask you to appoint a VAT representative. This person or firm takes care of you, handles VAT filings, and shares legal responsibility for compliance.
- Most representatives require financial security or a deposit before agreeing to act. Choose someone reliable, as mistakes they make can still impact your business.
- Using a representative ensures your business stays compliant, especially if you manage high-volume sales or lack in-house Tax knowledge.
Selling through marketplaces and VAT responsibility
- For orders under £135, the platform collects and pays VAT to HMRC.
- For orders above £135, import VAT is paid at the border, usually by the seller or the buyer, depending on the Incoterms.
- If you sell digital services like apps, courses, or online subscriptions to UK consumers, you must also charge VAT.
- Since Brexit, the EU VAT MOSS scheme no longer applies to UK sales. Foreign sellers are required to register under the UK Non-Union VAT Scheme, charge VAT at the UK rate (currently 20%), and file returns with HMRC.
- If you don’t, you risk fines or having your digital platform sales blocked.
How to register for UK VAT as an overseas seller
You can register online through the HMRC VAT registration portal. Be prepared to provide:
- Your business name and address.
- The nature of your products or services.
- Details of UK sales and expected turnover.
- Bank or payment information for VAT remittance.
- Once approved, you’ll receive a UK VAT number, which must appear on invoices, receipts, and, in some cases, packaging documents.
- Overseas sellers generally file quarterly VAT returns, reporting total sales, VAT collected, and VAT owed. These records must be kept for at least six years.
If you’re registered for VAT in the UK, you must comply with Making Tax Digital (MTD). This means:
- All VAT records must be stored digitally.
- Returns must be filed using HMRC-recognised software such as Swift VAT Pro.
Manual or paper submissions are not accepted except in rare cases. MTD reduces filing errors, improves audit readiness, and makes it easier to track VAT transactions.
Common mistakes overseas sellers make
- Assuming the £85,000 UK VAT threshold applies (it doesn’t).
- Thinking marketplaces handle all VAT obligations.
- For orders under £135, VAT is not applied.
- Sending invoices that don’t comply with UK VAT regulations.
- Keeping documents by hand rather than electronically.
Best practices for UK VAT compliance
To stay compliant and avoid trouble with HMRC:
- Before every sale, make sure your products are in the right place.
- Use checkout processes that automatically calculate UK VAT.
- Save electronic copies of your invoices and payment information.
- Every quarter, verify VAT data with your accounting system.
- To stay in compliance, review all MTD updates regularly.
If in doubt, seek advice from a VAT expert or use an automatic accuracy tool.
Consequences of non-compliance
- Penalties equal to 100% of the outstanding VAT.
- Items that customs have detained or seized.
- Suspensions of marketplace accounts.
Why VAT compliance benefits your business
- Speeds up customs clearance.
- Improves marketplace ratings.
- Enhances customer trust.
- Allows you to reclaim VAT on business expenses.
Final thoughts
VAT compliance is necessary when selling to UK clients from abroad. It’s essential to operate a respectable, professional company. Utilise MTD VAT bridging software, register early, and conduct routine process reviews.
Frequently Asked Questions:
Your Questions – Answered ,We’re here to help you with anything VAT-related.
1. Who needs to register for UK VAT as an overseas seller?
Overseas sellers must register for UK VAT if they meet certain conditions. This includes storing goods in the UK for sale, such as in warehouses or fulfilment centres, such as Amazon FBA. You also need to register if you sell goods directly to UK customers, or if you sell through marketplaces that require VAT registration, and each order is £ 135 or less.
Digital products and services, including apps, software, subscriptions, or online courses sold to UK consumers, also trigger a registration requirement. Unlike UK businesses, overseas sellers do not have the £85,000 annual turnover threshold. Even a single qualifying sale can make VAT registration mandatory.
Registering early ensures you stay compliant with HMRC rules, avoid fines, prevent customs delays, and maintain access to marketplaces. Proper registration also ensures accurate records, making quarterly filings and audits smoother while protecting your business’s reputation.
2. What is the £135 order value VAT rule for UK sales?
The £135 VAT rule applies to goods sold by overseas sellers to UK customers. For any order valued at £135 or less, VAT must be charged at the point of sale rather than upon import into the UK. This means the seller is responsible for collecting UK VAT during checkout, ensuring the correct rate is applied, and paying it to HMRC.
Some marketplaces, such as Amazon, eBay, or Etsy, automatically collect VAT on these smaller orders, but sellers must still maintain accurate records and confirm how the platform handles VAT. For orders above £135, import VAT is typically collected at the border by the buyer or seller, depending on the shipping terms.
Understanding this rule is critical to avoid undercharging VAT, non-compliance penalties, or shipping delays. Maintaining clear records and following HMRC guidelines ensures smooth sales and protects your business from fines or account suspensions.
3. When is appointing a VAT representative required?
Overseas sellers based outside the UK and EU may need to appoint a VAT representative. HMRC requires this representative to act on the seller’s behalf, filing VAT returns, making payments, and taking legal responsibility alongside the business. Appointing a representative is essential for compliance, especially for sellers with no UK presence or limited experience with VAT regulations.
Most representatives ask for financial security or a deposit before agreeing to act. Choosing a reliable representative is crucial, as mistakes they make can affect your compliance, lead to penalties, or delay customs clearance.
Even when using a representative, sellers must maintain accurate records and ensure all transactions are reported correctly. For businesses handling multiple sales channels or high-volume orders, a VAT representative simplifies filings, reduces errors, and ensures VAT obligations are fully met under UK law.
4. How do overseas sellers register for UK VAT?
Overseas sellers register for UK VAT online via the HMRC VAT registration portal. You will need to provide your official business name, address, a description of your products or services, expected UK sales, and payment details for VAT remittance. Once HMRC-recognised your application, you receive a UK VAT number, which must appear on invoices, receipts, and, in some cases, shipping documents.
Overseas sellers typically file VAT returns quarterly, reporting total sales, VAT collected, and VAT owed. Records must be kept for at least six years. Registering promptly ensures compliance, prevents penalties, and allows smooth customs processing.
Using digital tools like HMRC-recognised software or accounting platforms helps maintain accurate records, track VAT obligations, and stay compliant with Making Tax Digital rules. Timely registration also ensures your business is eligible to reclaim VAT on applicable expenses.
5. What are common mistakes overseas sellers make regarding UK VAT?
Many overseas sellers make avoidable mistakes when handling UK VAT. A standard error assumes the £85,000 UK threshold applies, which is only for UK-based businesses. Sellers may also think marketplaces cover all VAT obligations, leading to undercharged VAT.
Other mistakes include failing to apply VAT to orders under £135, issuing invoices that do not meet UK VAT rules, or keeping records manually rather than digitally. These errors can result in penalties, fines, customs delays, or even the suspension of marketplace accounts. Failing to comply with Making Tax Digital (MTD) requirements is another frequent mistake.
Overseas sellers who don’t maintain accurate, digital records risk errors in filings, delayed payments, and audits. Avoiding these mistakes requires careful planning, understanding UK VAT rules, keeping detailed digital records, using automated checkout systems, and, when needed, consulting VAT experts to ensure full compliance and smooth operations.