All of our Australian eCommerce clients that use Shopify as their marketplace received the following email from Shopify over the last week (January/2021). This article covers the implications of Australian businesses selling low value goods (basket value under $135 pounds) to UK resident customers.
Previous to 1 January 2021, Australian businesses were only required to register to collect UK VAT if their total sales to the UK exceeded $85,000 pounds within a 12 month threshold. For most of our eCommerce clients, total sales did not exceed this threshold so there was no need for concern.
Effective 1 January 2021, the rules have changed in a major way. Businesses are now required to register for VAT from the first dollar they sell to the UK. This places a very high burden on those businesses that occasionally make sales to the UK, as the cost of compliance may well exceed any profit made on the total sales.
Unfortunately at this stage there does not appear to be a workaround for this issue. So, if your business wishes to sell to the UK going forward, you must do the following:
- Register for VAT with HMRC. Instructions here
- Register for an EORI (Economic Registration and Identification Number) here
- Updated your settings in Shopify to indicate you are now collecting VAT on sales to the UK – instructions here
We can attend to this registration for you, if you are a CloudCounting client. Please contact our office to discuss and obtain a quote. If you are not a CloudCounting client but wish to discuss, please give the office a call on 0426625683.
Once you have performed the above steps, your business will be required to lodge a VAT return four times per year. We can also attend to this lodgement on your behalf.
Please note that some marketplaces collect the sales tax on your behalf (Amazon, eBay, etc..) so this article is written in relation to our Shopify marketplace eCommerce customers only.
Running an eCommerce business that sells product to overseas customers can trigger compliance obligations of both sales tax and income tax. It is important to use an accountant that specializes in eCommerce so you can ensure you are adhering to all compliance obligations. Feel free to fill out our form to get started.