On 16 September 2016 HMRC published guidance for “overseas businesses using an online marketplace to sell goods in the UK”. The guidance is for overseas businesses that store and sell goods in the UK although they have no business establishment in the UK. Many of these businesses use an online marketplace that provides a fulfilment service to improve the time taken to deliver goods to the customer.
An overseas business that holds stock in the UK, even if it’s stored in someone else’s warehouse, and sells from that stock to UK customers has to register for VAT. There is no registration limit for overseas businesses in these circumstances. That means there is no waiting for them to exceed the registration limit before they have to register. The issue is that unless they are made aware of the need to be VAT registered they are unlikely to register. HMRC are intending to make the online marketplaces that many of these overseas businesses use responsible for the VAT if the overseas business fails or refuses to register for VAT in the UK.
These rules apply to any overseas business that stores goods in the UK that it sells in the UK. Businesses in EU member states are just as likely to store goods in the UK as businesses elsewhere in the world because it reduces delivery times from a week or so down to two or three days. This allows them to compete with any other business that is supplying goods from stock in the UK. The aim being, no doubt, to address the wants of the impatient retail customer who wants their goods as quickly as can be arranged.
The situation addressed by the guidance is different from that addressed by the VAT Mini one-stop shop for digital services system as that only addresses the issue arising from the change in law affecting the place of supply of e-services. For goods the place of supply is usually where the goods are located when sold to a customer – the HMRC guidance covers just this situation.