UK VAT for Canadian E-Commerce Sellers

The United Kingdom left the European Union customs union when the Brexit transition period ended on January 1, 2021. Since then, UK VAT has operated as a completely separate system from EU VAT, with its own registration rules, thresholds, and filing requirements. A Canadian seller compliant with EU VAT has not addressed UK VAT. The two systems require separate analysis.

This guide covers when UK VAT applies to Canadian sellers, how marketplace facilitator rules work under UK law, what Amazon and Etsy handle versus what remains your responsibility, and what sellers with UK-stored inventory need to assess.

Northern Ireland has special VAT and customs rules for goods that are different from the Great Britain rules. This guide focuses mainly on goods sold to customers in Great Britain (England, Scotland, and Wales), with Northern Ireland flagged as a separate analysis point.

How UK VAT Works

UK VAT is administered by HMRC (His Majesty’s Revenue and Customs). The standard rate is 20%. Reduced rates apply to certain categories: 5% for domestic energy and children’s car seats, for example. Zero-rating applies to children’s clothing, most food, books, and certain other categories. The applicable rate depends on the product and its classification under HMRC rules.

For Canadian sellers, the two most relevant distinctions are:

• Goods shipped from Canada to Great Britain buyers: VAT collection depends on the consignment value and sales channel. At GBP 135 or below, UK supply VAT is charged at the point of sale. Above GBP 135, normal import VAT and customs rules apply at import.
• Goods stored in a UK fulfillment centre (such as Amazon FBA UK): the import of inventory, the recovery of import VAT, marketplace deemed-supplier rules, and any direct or B2B sales each need to be assessed separately.

Low value consignment relief for goods valued at GBP 15 or less has been removed. The result is not that every shipment has import VAT collected at the border. For Great Britain consignments valued at GBP 135 or below, VAT is generally handled as UK supply VAT at checkout; for higher-value consignments, normal import VAT and customs rules apply.

The GBP 135 Threshold

The GBP 135 threshold is the UK equivalent of the EU’s EUR 150 threshold. For Great Britain sales, it determines how VAT is collected on imported goods, not whether VAT matters.

Goods with a value at or below GBP 135: VAT is collected at the point of sale, not at the border. For marketplace sales, the marketplace (Amazon, Etsy, eBay) is treated as the supplier for VAT purposes and is responsible for collecting and remitting VAT, unless the sale is B2B and the customer has provided a valid UK VAT registration number. For direct sales through a seller’s own website, the seller is responsible for charging UK VAT at checkout unless the B2B VAT-number exception applies.

Goods with a value above GBP 135: VAT is collected on import into Great Britain as part of the standard import process. The buyer typically pays import VAT (and any applicable customs duty) on delivery, unless the seller has arranged DDP (Delivered Duty Paid) shipping.

The GBP 135 threshold applies per consignment, not per item. A multi-item order shipped as one parcel is assessed as a single consignment. Splitting a single order into multiple parcels to stay below the threshold is not a compliant approach.

Marketplace Facilitator Rules (OMP Rules)

The UK uses the term Online Marketplace (OMP) rules for what is often called marketplace facilitator legislation. Under the OMP rules, which took effect January 1, 2021:

• For goods shipped from outside the UK with a value at or below GBP 135 and sold through a marketplace to Great Britain customers, the marketplace is responsible for collecting and remitting UK VAT, subject to the B2B VAT-number exception
• For goods already located in the UK at the point of sale and sold through a marketplace by a non-UK seller, the marketplace is treated as the supplier for UK VAT on consumer sales regardless of order value
• The overseas seller remains responsible for import VAT and customs duty when goods are first imported into the UK, and can still have VAT obligations for sales to UK VAT-registered business customers

Amazon: Amazon applies the OMP rules on qualifying UK sales. For goods dispatched from Canada to Great Britain buyers at GBP 135 or below through Amazon.co.uk, Amazon collects and remits UK VAT on covered consumer sales. For goods already stored in the UK and sold through Amazon by a non-UK seller, Amazon generally accounts for VAT on covered consumer sales regardless of order value, but the seller still needs to assess import VAT recovery, VAT registration, and B2B or direct-channel obligations. Amazon’s UK VAT information for sellers describes the scope of marketplace collection.

Etsy: Etsy collects and remits UK VAT on applicable UK sales. Etsy’s seller tax documentation describes where collection applies.

Shopify and direct channels: OMP rules do not apply to a seller’s own website. If you sell GBP 135 or below goods to Great Britain consumers through your own Shopify store, you are responsible for charging and remitting UK VAT. This requires UK VAT registration unless the sales fall into a narrow exception, such as sales only to UK VAT-registered business customers that provide their VAT number.

When a Canadian Seller Needs UK VAT Registration

A Canadian seller needs to register for UK VAT in the following situations:

Direct sales to Great Britain buyers below GBP 135: If you sell goods below GBP 135 to Great Britain consumers through your own website and no marketplace is handling VAT on those sales, you must register for UK VAT, charge 20% (or the applicable rate) at checkout, and file UK VAT returns. B2B sales where the customer provides a valid UK VAT registration number follow different reverse-charge-style rules.

Goods stored in the UK: If you use Amazon FBA UK or any other fulfillment arrangement that involves importing goods into the UK and storing them in a UK warehouse, the importing entity is responsible for import VAT and customs duty when the goods enter the UK. If those goods are sold directly to UK customers, VAT registration is required. If they are sold only through an online marketplace and the marketplace is liable for VAT, the seller may be treated as making zero-rated deemed supplies to the marketplace; in that case, the seller may register for VAT or apply for exemption from registration. UK VAT registration is normally needed to recover import VAT as input tax.

B2B or non-marketplace UK-stock sales: OMP collection does not remove every VAT obligation. If goods located in the UK are sold directly by the Canadian seller, or are sold to a UK VAT-registered business customer that provides a VAT number, the seller can remain responsible for VAT accounting. These cases should be separated from ordinary marketplace consumer sales.

There is no GBP 90,000 registration threshold for a non-established taxable person that makes taxable supplies requiring UK VAT registration. Unlike UK-established businesses, which use the GBP 90,000 annual registration threshold, overseas sellers can have a registration obligation from the first relevant supply. Exceptions can apply, including all-zero-rated supplies or certain B2B/OMP scenarios, so the threshold point should not be read as a blanket registration rule for every marketplace transaction.

UK VAT Registration Process

UK VAT registration for a non-UK business is done through HMRC’s online VAT registration service. Non-UK businesses can generally register directly without a UK fiscal representative, which is one procedural difference from EU IOSS where an intermediary is often required.

After registration, HMRC issues a UK VAT registration number (GB followed by nine digits). This number must appear on VAT invoices where a VAT invoice is required. VAT returns are usually filed quarterly through HMRC’s Making Tax Digital (MTD) system, which requires compatible accounting software or API-connected filing. MTD for VAT has generally been mandatory for VAT-registered businesses since April 2022.

Filing deadlines are normally one calendar month and seven days after the end of each VAT accounting period. Payment of VAT owed is generally due by the same deadline, subject to the payment method used. Late filing and late payment each carry penalties under HMRC’s points-based penalty system introduced in January 2023.

Import VAT and FBA UK

If you import goods into the UK for FBA storage, import VAT is due at the point of importation unless postponed VAT accounting or another permitted import accounting method is used. For standard-rated goods the VAT rate is usually 20%, but import VAT is calculated on the import VAT value, not simply on the product sale price. UK VAT-registered businesses can recover import VAT as input tax on their UK VAT return when the normal recovery conditions are met and they hold the right import VAT evidence. This makes UK VAT registration a practical necessity for many FBA UK sellers, not just a compliance question: without registration, import VAT paid on incoming inventory usually cannot be recovered through a VAT return.

Import VAT is distinct from the VAT charged on sales. Both flow through the UK VAT return, with input VAT (import VAT and UK purchases) offsetting output VAT (VAT collected on UK sales). The net position is either paid to HMRC or, if input VAT exceeds output VAT, repaid by HMRC.

Accurate customs valuation of goods imported into the UK is required. The customs value generally equals the transaction value of the goods: the price paid for them, adjusted for certain additions and deductions as specified in UK customs rules. Misvaluing imports is a customs offence and can affect the amount of import VAT recovered.

UK vs. EU VAT: Key Differences

A Canadian seller expanding into both the UK and EU needs separate compliance structures for each. UK VAT registration and EU IOSS or OSS registration are distinct obligations, managed through different systems, filed on different schedules, and enforced by different authorities.

What to Track

For Canadian sellers with UK sales, the following records support compliance and any future HMRC inquiry:

• Total UK sales by channel (Amazon.co.uk marketplace, Etsy, Shopify, other), by VAT quarter
• For marketplace sales: documentation from Amazon or Etsy confirming VAT was collected and remitted by the marketplace under OMP rules, including which transactions and at what amounts
• For direct sales: confirmation that UK VAT was charged at checkout and at what rate
• For B2B sales: customer VAT registration numbers, validation evidence, and reverse-charge notes where used
• Import documentation for any goods shipped into the UK for FBA storage, including EORI details, customs entry numbers, C79 certificates or postponed import VAT statements, and import VAT amounts paid
• UK VAT returns filed and payment records

HMRC requires VAT records to be kept for six years. MTD-compatible software used for filing typically maintains these records by default, but sellers should verify that the data can be exported and retained independently of any software subscription.

Scope of This Guide

This guide covers UK VAT for Canadian sellers dispatching goods from Canada to Great Britain buyers and sellers importing goods into the UK for fulfillment. It does not cover:

• Individual product VAT rate classifications (zero-rated, reduced-rated, standard-rated)
• Customs duty rates or tariff classification for specific product categories
• UK Customs Duty relief programs
• Northern Ireland beyond the brief signposts above, because it operates under a different VAT and customs framework that combines aspects of UK and EU rules
• Digital services sold to UK customers, which have a separate supply-place-of-supply analysis
• Full B2B treatment for transactions with UK VAT-registered businesses

HMRC publishes guidance on overseas goods sold through online marketplaces, overseas goods sold directly to UK customers, and VAT registration.

For an overview of how UK VAT sits alongside US sales tax and EU VAT obligations for Canadian sellers expanding internationally, see Cross-Border E-Commerce Compliance for Canadian Sellers.