It may be true that the only sure thing in life is death and taxes, but the rules and laws around said taxes are often less of a sure thing. Following their exit from the European Union, the United Kingdom has made some changes to their Value Added Tax (VAT) laws. As the UK finds their feet post-EU, enforcing their own import and VAT laws from January 1, 2021, we’re in the position of figuring out how this affects international trade and, more specifically, the Discogs community of sellers and buyers in and outside of the UK.
At Discogs, we’re working to understand the impacts these changes will have on the marketplace and how to work with UK tax authorities and the Discogs Community. In the meantime, we want to share what we do know today, and assure you that we’re working on solutions and will update you as we learn more.
The most important thing to know is that as a Discogs Seller outside the UK, you can still sell to buyers residing in the UK, but you have additional responsibilities when it comes to tax collection that we’ll outline here.
Key Changes with UK VAT Collection for Sellers and Buyers
Collection of VAT on orders bound for the UK now has to occur at the point of sale on all shipments where the total value is less than £135. That means that if you’re selling to the UK, you will need to have a registered UK VAT ID and be responsible for collecting VAT on shipments of up to £135 from UK buyers. Previously, shipments of £15 or less were exempt under the low goods provision and VAT could be collected at the point of importation.
For orders over the value of £135, the seller may collect the VAT from the buyer or designate the buyer as the importer of record. If the buyer is designated as the importer of record, they will settle any VAT and customs fees at importation.
As a buyer, if you’re UK VAT registered and ordering from a seller outside the UK, you’ll need to provide your UK VAT ID to the seller when your order is placed. You can recoup any UK VAT charges on orders in your quarterly UK VAT return. If the buyer supplies a UK VAT ID, it should be displayed prominently on the shipments’ packaging, so it’s visible to UK customs agents.
Will Discogs Facilitate UK VAT Collection?
We’re continuing our commitment to make selling as easy as possible, regardless of where you’re selling from or to, as well as ensuring music fans in the UK will always have access to a full and vibrant market of physical music. We’re actively working with tax advisors in the UK to ensure that happens.
Discogs currently collects sales-related taxes in regions where we’re legally responsible to do so. The new UK VAT law is very complicated as it relates to Online Marketplaces. It is not yet clear whether Discogs can be categorized as an Online Marketplace or Marketplace Facilitator under the new laws. However, due to the scale of this change and the added complexity it creates for sellers, we recognize the need for a solution.
While we don’t have all the answers right now, we’ll update this post with more details as we learn more and finalize our plans. We hope to have a development plan and timeline to share in the coming months.
Are Discogs’ Seller Fees for UK Resident Sellers Taxable?
Yes, under UK VAT law, Discogs’ 8% Sellers Fee is considered an electronic service fee and is taxable to sellers resident in the UK, just as it is in the EU. The current UK VAT rate for electronic services is 20% (for example, on an order with a total item value of £100, the UK VAT due on the seller fee would come out to £1.60).
If you are a new or existing Discogs seller and you haven’t already entered a UK VAT ID into your Seller Settings, this cannot be entered or changed at this time. We are currently unable to validate new UK VAT IDs in Seller Settings, and therefore UK VAT will be added to your monthly invoice. We are working on a resolution for this and will update you as soon as we know more. In the meantime, you can recoup any UK VAT you pay on Discogs seller fees in your quarterly UK VAT return.
If you’re a UK resident seller with a UK VAT ID and you already have your UK VAT ID in your Seller Settings, this enables us to remove UK VAT from your monthly Discogs invoice.
What Can You Do Now?
We understand this is an inconvenience and we’re aiming to address this more directly as soon we have more information. If you’re a seller outside the UK and you want to continue to sell to UK buyers, please get familiar with the new UK VAT laws and your responsibilities as a seller.
If collecting UK VAT is not viable for you at this time and you’d like to pause selling to the UK, you can temporarily suspend the United Kingdom and United Kingdom (Channel Islands) from your Shipping Policies (see our video tutorial on how to deselect a country from your Shipping Policy). This means buyers in the UK will not be able to order any items from your inventory. You can resume selling to the UK again at any time by adding it back to your Shipping Policies.
For information on UK VAT collection and the requirements in more depth, please see our help document. We also recommend speaking to a tax advisor to ensure you can comply with UK registration and reporting requirements.
We appreciate your patience and understanding as we navigate this challenging law change and figure out the best solution for everyone. Cheerio for now, check back on this post soon for updates!
Header image courtesy of Andrew Ling via Unsplash.