Selling goods from China to customers in Great Britain can create UK VAT and customs obligations even when the seller has no UK office. The correct treatment depends mainly on the consignment value, sales channel, customer status, stock location and importer of record.
This guide covers sales to England, Scotland and Wales through an ecommerce website or online marketplace. Northern Ireland follows different rules and is outside this guide.
UK VAT and duty rules
| Sales scenario | VAT treatment | Customs Duty | Main party responsible |
|---|---|---|---|
| Direct consumer sale, goods outside the UK, consignment £135 or less | UK VAT charged at checkout | Normally no duty | Overseas seller |
| Marketplace consumer sale, goods outside the UK, consignment £135 or less | UK VAT charged at checkout | Normally no duty | Online marketplace |
| Consignment above £135 | Import VAT applies at import | May apply | Importer of record |
| Goods stored in Great Britain and sold directly | UK VAT applies to the sale | Import charges arise when stock enters Britain | Overseas seller |
| Goods stored in Great Britain and sold through a marketplace to consumers | Marketplace normally accounts for sales VAT | Import charges arise when stock enters Britain | Marketplace for the sale, importer for the import |
HMRC applies the £135 limit to the whole consignment, not each item. The test uses the goods’ intrinsic value and normally excludes separately identified transport, insurance and taxes.
Consignments up to £135
For direct business to consumer sales, the Chinese seller must normally register for UK VAT, charge the correct UK rate at checkout and report that VAT to HMRC. The usual UK registration threshold does not protect a non-established business making taxable UK supplies.
Most goods carry 20% VAT, although some qualify for 5% or 0%. Product classification must therefore be checked rather than applying 20% automatically.
If a VAT inclusive selling price is £120 and the rate is 20%:
- Net sale: £120 divided by 1.20 equals £100
- Output VAT: £120 less £100 equals £20
If the customer is a UK VAT registered business and provides a valid VAT number, the seller generally does not charge VAT under the low value rules. The customer accounts for VAT using the reverse charge.
Sales through marketplaces
For goods outside the UK sold to Great Britain consumers in consignments of £135 or less, the online marketplace normally collects and reports VAT. The seller should retain marketplace tax reports and confirm that product tax codes and customer status are correct.
Marketplace collection does not remove every seller obligation. VAT registration may still be needed if the business makes direct website sales, receives a business customer’s VAT details, imports stock for recovery of import VAT, or makes other UK taxable supplies.
Orders above £135
Normal import rules apply when a consignment exceeds £135. Import VAT becomes due and Customs Duty may also apply, depending on the commodity code, customs value and any available relief.
Before dispatch, agree who will be importer of record. If the seller imports under a delivered duty paid arrangement, it should plan for a GB EORI number, customs declarations, duty, import VAT and likely UK VAT registration. If the customer is importer, unexpected border charges can damage conversion rates and increase refused deliveries.
The UK Trade Tariff provides the commodity code, duty rate, VAT rate and possible controls. Product material, use, manufacturing method and packaging can affect classification.
Import tax calculation
Assume goods cost £200, freight and insurance to the UK border cost £20, the illustrative duty rate is 4%, UK destination costs are £10 and VAT is 20%.
| Calculation | Amount |
|---|---|
| Customs value | £220.00 |
| Duty at 4% | £8.80 |
| Import VAT base | £238.80 |
| Import VAT at 20% | £47.76 |
The example duty rate is illustrative. Customs value normally includes the price paid plus transport, insurance, loading and handling to the UK border. The import VAT base can also include duty and relevant costs to the first UK destination.
Stock held in Britain
An overseas seller making direct sales from stock already in Great Britain must register and account for VAT regardless of the goods’ value.
For consumer sales through an online marketplace, the marketplace is generally treated as making the taxable sale. A deemed zero rated supply arises from the overseas seller to the marketplace. VAT registration can remain useful where the seller needs to recover eligible import VAT on stock brought into Britain.
Ecommerce accounting records
Accurate accounting should separate revenue, output VAT, marketplace VAT, import VAT, Customs Duty, freight, marketplace fees and stock costs.
- Record VAT inclusive takings as net sales plus output VAT where the seller is liable.
- Do not record VAT collected by a marketplace as the seller’s VAT liability.
- Treat irrecoverable Customs Duty and directly attributable import costs as part of inventory cost.
- Reclaim import VAT only when the business is entitled to do so and holds valid evidence in its own details.
- Reconcile orders, payouts, refunds, customs entries and VAT returns by channel.
A VAT registered importer may use postponed VAT accounting to declare and recover eligible import VAT on the same return. Monthly postponed import VAT statements support the entries and must be retained.
VAT records generally need to be kept for at least six years. VAT registered businesses must also maintain digital records and file through Making Tax Digital compatible software.
Practical compliance checklist
- Map whether each sale is direct, marketplace, business or consumer.
- Test the total consignment against £135.
- Confirm the importer of record before shipping.
- Obtain the correct commodity code and VAT rate.
- Secure a GB EORI number where required.
- Connect website, marketplace, payment and accounting records.
- Retain invoices, customs declarations, C79 certificates and postponed VAT statements.
- Review pricing using the full landed cost.
The government has announced plans to remove the current low value Customs Duty relief by March 2029 at the latest. Sellers should monitor implementation dates and system changes, but the current £135 rules remain in effect for now.
How UK ecommerce accountants help
UK ecommerce accountants help overseas sellers understand their UK tax position before goods leave China. The service brings ecommerce VAT, customs data and ecommerce bookkeeping into one clear compliance process.
- Assess VAT registration requirements for direct and marketplace sales
- Review the £135 treatment, stock flows and importer arrangements
- Support VAT registration, VAT returns and Making Tax Digital compliance
- Reconcile marketplace reports, website orders, fees, refunds and payouts
- Review Customs Duty, import VAT and landed cost accounting
- Help maintain evidence for C79 and postponed VAT claims
Frequently asked questions:
Does a Chinese seller need UK VAT registration?
Usually yes for direct consumer sales of consignments worth £135 or less and for direct sales from goods already in Great Britain. Registration may not be required where a marketplace accounts for all relevant consumer sales and no other UK taxable activity exists.
Does the £135 limit apply per product?
No. It applies to the combined intrinsic value of all goods in the consignment.
Can import VAT be reclaimed?
A UK VAT registered business may reclaim eligible import VAT when the goods support taxable business activity and the correct evidence is held. Ownership, importer details and the C79 or postponed VAT statement must align.
Who pays tax on orders above £135?
The importer of record normally handles import VAT and any Customs Duty. The sales terms should identify whether the seller or customer before checkout.
