VAT rules for buyers

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There is a lot of confusion regarding VAT.

Should it be shown on all receipts? If it isn't what does that mean? Do I have to pay VAT if I buy abroad?

This is a rough guide to VAT for buyers.

VAT and Receipts.

If the seller is a private individual selling their own used property in the EU or UK then no VAT is payable. That is because the VAT was paid for the item when it was first bought. In effect the VAT is considered already included. (Dealers in second-hand goods can even offset this against their VAT bill if they record the right information.)

For traders in the UK (ie people selling as business), contrary to popular belief, VAT does not have to be shown on all receipts, and in fact in some cases must not.

When they must not.

Legally unregistered traders.

The first circumstance is a trader whose total turnover in a given year is less than a certain amount. (£64,000 thas time I checked) These traders do not have to register for VAT but may if they wish. (If their running expenses are high, then the VAT recoverable might outweigh the losses incurred.

Because of the amount of work many traders (especially in collectables) do to obtain bargains for re-sale on eBay the 'markup' is necessarily large, so it is quite possible to make a 'living wage' before they get to the VAT threshold.

(Some VAT paying sellers try and tell you that there is something illegal going on if you are not charged VAT by a trader. Ignore such comments they are only trying to justify their higher prices. It does not mean that the non VAT payer is providing poorer goods or poorer after sales!)

As no VAT is collected by these traders it is illegal for them to charge VAT or show VAT as included in the price.

Traders using 'The Margin Scheme for VAT' to pay their VAT bill.

This is a scheme by which a registered trader who buys second-hand goods for re-sale can calculate VAT on the difference between the price they paid and the price they sold an item at. The is to say the margin.

This is used when the trader cannot obtain a receipt showing VAT, or none at all can be shown. (Eg the goods were bought privately, as in a boot sale.)

In such cases the receipt cannot show the VAT element of the selling price, and must not show it.

In these cases instead the receipt must show the sellers VAT registration number, and include a declaration that no 'input tax' will be claimed in respect of the goods on the receipt. (Input tax is the VAT portion of good bought, which is usually deducted from the VAT bill at the end of the year.)

So if you get a receipt not showing VAT, but with a VAT registration number it must have such a statement.

In both the above cases a UK trader must not show VAT on a receipt. In all other cases VAT must be shown even if it is included in the price.

EU VAT charges.  

Sellers in various countries pay different rates of VAT. If your seller is not in the UK and pays VAT (and the rules are different in many countries) then the VAT charged must be the rate of VAT fr those items in the country that the seller business is based. Ie, if your seller is in France the French VAT rate applies.

Outside Europe.

Traders outside europe may not charge VAT but that does not mean that you won't have to.

When do I have to pay VAT for non-EU goods?

Currently if the value of the goods (including shipping charges) is over £18 you are liable to pay VAT.

This should be shown on the customs note attached to the item.

You pay VAT on the full amount, plus any customs duty payable, at the applicable rate.

Who actually pays the VAT on non-EU goods?

The VAT is paid by 'the importer'. That means whoever has an import/export license for the UK.

Unless you are a large import business that will not be you, but the shipping company. They will collect your VAT from you, and may charge for doing so. (The charge itself cannot include any VAT.)

Parcelforce charge £8 at the moment and they will be the importer for items sent via the normal postal service. Other couriers have different rates.

How is it collected?

If it is Parcelforce you will be sent a letter asking for the payment before the goods are delivered. Other shipping agencies may send you a bill after the goods are delivered. You must pay this bill.

Some couriers will not bill you for VAT less than a certain amount. That is because a companies VAT may be calculated in a number of ways, one of which is as an estimated lump-sum based on the kind of buisness they do and their annual turnover. The VAT payable is often 'made-up' from the shipping fees, or form the VAT collection fee for larger consignments. (Often these companies have relatively large fees for this.)

What happens if I am not charged for VAT on an import, and I think it should have been?

If you haven't been billed for the VAT by the importing agent, don't worry. It's not your responsibility, so you won't get into trouble with the tax-man.

So if you think you may be due a bill, check with the shipping company. If they don't have a record or choose not to charge, then you don't pay anything extra.

What if the customs form is wrong?

Well again, it's not really your problem. Unless you colluded with the seller to falsify the customs declaration you are guilty of no offense.

The seller has broken the law in their own country, and usually the customs and excise in different countries co-operate to enforce this.

If you contact the customs office about a falsified declaration, they may ask you for details so that they can investigate the seller, but will not actually send you a bill. In fact they may not investigate your report as they may not have enough evidence to do so in the first place!

(In practice what they do is open a proportion of the packages to examine the goods. They can then check on the sellers normal pricing and if they think it is falsified begin an investigation. This will delay your package. In th ecase of an eBay sale they can demand that ebay provide the sales information directly, but they may contact you first to determine how the goods were bought.)

To sum-up 

It is not the case that all UK business sellers have to charge VAT.

It is not the case that all VAT registered sellers must show the applicable VAT on all receipts. (And in some cases must not) But must in that case make a statement to that effect.

EU purchases will be charged VAT at the rate required in the sellers country.

Non-EU purchases above the 'free' limit will be charged VAT on entry to the UK. If asked to pay you must pay this bill. The bill might (Almost certainly will) include a collection fee.

If you are not charged VAT when you think you should have been, contact the shipping company.

It is an offence to collude with the seller to provide a false customs declaration. But not an offence to receive goods falsely declared.

As always, buy safely, and ignore sellers who try to say that not charging VAT is illegal, or is indicative of poor standards.




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