UK Value Added Tax (VAT) applies to sellers who use overseas warehouses, in other words, as long as you have a warehouse in the UK, whether it is FBA or other UK warehouses, you need to register for UK VAT.
A lot of new sellers often come to ask, the United Kingdom tax reform, now the value-added tax by the platform on behalf of the withholding and payment, I still need to declare vat?
It all started with Brexit.
On January 31, 2020, the United Kingdom officially leaves the European Union and enters an 11-month transition period.
On January 1, 2021, the transition period officially ended and the major platforms of cross-border e-commerce began to fully implement the withholding and payment of UK VAT (and the UK tax reform).
After the tax reform, the platform withholds and pays on behalf of the seller, and the seller's credit still needs to be declared by the accountant. Under the standard tax system, if the seller pays the import VAT at the time of import, the seller can make the credit of the import VAT invoice when declaring the sales tax.
The role of the tax agent will be to file import VAT and other VAT invoices for sellers, withholding and B2B sales on behalf of the UK domestic platform.
Following the Tax Reform, UK VAT will no longer apply to the UK Flat low rate regime as the amount withheld and paid by Flat will be presented as 20%.
On May 9, 2022, HMRC issued a new VAT penalty policy. The new policy will be effective from January 1, 2023 onwards.
More detailed guidance on changes to VAT late submission penalties, late payment penalties and VAT interest charges will be published in December 2022.
Penalty for late filing of UK VAT returns:
A late submission penalty point will be issued for each VAT return that is submitted late. Once the penalty threshold is reached, the seller will receive a penalty of £200 and an additional £200 for each subsequent late submission.
Penalty point thresholds for late submissions will vary based on submission frequency.
Penalty for not paying VAT on time:
Pay the full amount of VAT owed or agree to a payment plan without penalty if you are 1-15 days overdue.
16 to 30 days overdue, with the first penalty for the 2% calculation of the VAT owed received on the 15th day.
Overdue for more than 31 days will receive a first penalty of 2% of the VAT owed on the 15th day plus 2% of the VAT owed on the 30th day.
A second penalty is received during the unbilled period at the daily rate of 4% per annum. This is calculated when the outstanding balance is paid in full or a payment plan is agreed.
From January 1, 2023, HMRC will charge a late fee from the date your payment is late until the date you pay in full.
Interest on late payments is calculated at the Bank of England Base Rate plus 2.5%.
Repayment assistance will be withdrawn effective 1/1/2023.
For accounting periods beginning on or after January 1, 2023, HMRC will pay you interest on the repayment of the VAT you owe.
This will be calculated from the day after the due date or the date of submission (whichever is the later) until HMRC has paid you the full amount of the VAT refund due to you.
Interest on the repayment will be calculated at the Bank of England Base Rate less 1%. The minimum repayment interest rate will always be 0.5%, even if the repayment interest calculation results in a lower percentage.
Therefore, from January 1, 2023, sellers need to be careful not to have late submissions or late returns, as any late receipt of non-taxable or repayable VAT returns will be subject to late filing penalties and financial penalties.
If you have any questions about UK VAT, please feel free to contact Ms. Green Circle.
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