UK Value Added Tax (VAT) applies to sellers who use overseas storage. In other words, whenever you have stock in the UK, whether it is FBA or another UK warehouse, you need to register for UK VAT.
There are many novice sellers who often come to me to ask the UK tax reform. Now the vat is withheld and paid by the platform. Do I still need to declare VAT?
It starts with Brexit,
On January 31, 2020, the UK officially left the EU and entered an 11-month transition period.
On January 1, 2021, the transition period will officially end, and the major cross-border e-commerce platforms will begin to fully implement the relevant work of UK VAT withholding and payment (and UK tax reform).
After the tax reform, the platform will withhold and pay, and the seller's deduction still needs accounting and declaration. Under the system of standard tax rate, if the seller pays import VAT when importing, the seller can deduct import VAT invoice when declaring output tax.
The duty of the tax agent will be to declare the tax return of import VAT and other input VAT invoices for the seller, the withholding and payment of B2B sales in the UK platform.
Following the tax changes, UK VAT will no longer apply to the UK Flat low rate system, as the amount withheld by the platform will be represented at 20%.
On 9 May 2022, the Inland Revenue announced new VAT penalties. The new policy will take effect on January 1, 2023.
More detailed guidance on late filing penalties, late payment penalties and changes to VAT interest charges will be published in December 2022.
UK VAT Penalty for late filing of VAT return:
Each late VAT return will receive a late penalty point. Once the penalty threshold is reached, the seller will receive a £200 fine and submit an additional £200 for each subsequent delay.
Penalties for not paying VAT on time:
Be 1-15 days late and pay the VAT owed in full or agree to a payment plan without penalty.
16 to 30 days overdue, the 15th day receives the first penalty of 2 percent of the VAT owed.
Those who are more than 31 days late will receive the first penalty of 2% of VAT owed on the 15th day plus 2% of VAT owed on the 30th day.
During the period of unliquidated balance, a second penalty is received at a daily rate of 4% per annum. This is calculated when the outstanding balance has been paid in full or a payment plan has been agreed.
From 1 January 2023, HMRC will charge a late fee from the date your payment is late to the date you pay in full.
Interest on late payments is calculated at the Bank of England base rate plus 2.5%.
The repayment subsidy will be withdrawn from January 1, 2023.
For accounting periods commencing on or after 1 January 2023, HMRC will pay you interest on the VAT repayment you owe.
This will be calculated from the day after the due date or submission date, whichever is later, until HMRC pays you in full the amount of VAT refund due to you.
Interest on repayments will be calculated at the Bank of England base rate minus 1%. The minimum interest rate is always 0.5 per cent, even if the percentage calculated is lower.
Therefore, starting from January 1, 2023, sellers need to be careful not to submit late, late filing, oh, any late received no tax or repayment VAT returns will be subject to late filing fines and financial penalties.