Low-Value Consignment Relief (LVCR) relieves import VAT on commercial imports of goods valued at £15 or less or €22 within the rest of the EU. Customs duty is relieved on commercial imports of goods valued at £135 or less (except those that contain excise goods – alcohol, tobacco or perfume).
The Value Added Tax (Postal Packets and Amendment) (EU Exit) Regulations 2018 make an overseas supplier who sends parcels containing goods valued at £135 or less to the UK responsible for paying any import VAT that is due on the goods from 1 January 2021. It also removes Low-Value Consignment Relief (LVCR) which relieves import VAT on commercial imports of goods valued at £15 or less. The EU will remove LVCR from 1 July 2021.
This change is aimed at protecting the high street from what the Government sees as unfair competition from overseas sellers being able to sell low-value goods into the UK free of VAT. This also applies to drop shippers, many of whom have relied on LVCR to gain a competitive advantage.
Sellers can discharge their liability by either:
- Registering with HMRC and paying any import VAT due on a periodic return; or
- Paying the import VAT due to the parcel carrier who will make a payment to HMRC on their behalf.
These changes, therefore:
- Place a liability to pay import VAT on overseas sellers, and establishes a new online registration service and accounting system to enable the overseas supplier to discharge their liability. Each registered supplier will be issued with an ‘import VAT on parcels’ reference (unique identifier) which will be used to demonstrate that import VAT will be declared through the online system. In the context of the online service, a parcel carrier includes anyone who conveys a parcel.
- Provides an alternative to the requirement to register where the import VAT on a parcel is paid to a parcel carrier. It includes a requirement for an overseas supplier to retain the proof of the arrangement with the parcel carrier. The parcel carrier will be jointly and severally liable for the import VAT due on the goods in these circumstances. Carriers may require some form of guarantee or deposit in these circumstances.
- Provides that where parcels are sent without a parcels reference through a universal service provider the UK recipient will be held jointly and severally liable with the overseas seller for the import VAT due on the goods. This will create customer service issues if parcel references are missing.
- Allows HMRC to advise online marketplaces of non-compliance by overseas sellers. Where a marketplace continues to facilitate deliveries by a non-compliant overseas supplier it can be held jointly and severally liable for import VAT due in the future. Non-compliant sellers can therefore be expected to be suspended in these circumstances.
- Makes the UK recipient jointly and severally liable for the import VAT where they know or reasonably should have known that the supplier has made an incorrect declaration of the value or type of goods etc. Again this will create customer service issues.
- Applies a penalty on overseas sellers for failure to register.