Reverse VAT Charge for under £135 & Over £135

I have reviewed the VAT guide, but I am having difficulty locating specific details to confirm the correct bookkeeping procedures. Scenarios: 1- I purchased Item A from China. The supplier invoice suggests "Reverse charge: customer to account for VAT to HMRC" for all invoices under £135. 2 - I purchased Item B from China. The supplier did not provide a VAT invoice, and there is no mention of reverse charge for transactions over £135. 3 - To clarify, when either Item A or B is sold to a UK customer, VAT is charged and submitted to HMRC under the Flat Rate Scheme of 7.5% other Retail category. If the item is sold to an EU customer, such as the Republic of Ireland, the sale transaction is treated as "Zero Rated." Question: B2 - For our VAT returns, should we consider Item B, for example, a purchase of £175 from china, as "Reverse charge"? If not, should it be treated as "No VAT"? B3 - If set to Reverse Charge, are we potentially overpaying the VAT charge as no invoice is issued to confirm the VAT details? (Regardless of the status on the invoice from the China e-commerce business transaction, every sale made on the e-commerce website in the UK, e.g., eBay, Amazon, is subject to VAT anyway, so VAT is paid on sales.) Could you please clarify how to treat Item B for bookkeeping and ensure the correct tax code is used in the bookkeeping software? Thank you.

Hi R K,
If you purchase goods under £135 from an overseas customer asa VAT registered customer then these supplies should be accounted for by the VAT registered customer under the reverse charge procesure.
Please see below
VAT and overseas goods sold directly to customers in the UK
If the goods are over a value of £135 then normal import procedures will apply and import VAT will be due.
When these imported goods are then sold on to UK customers then VAT would then be charged on to the customer and if the seller is on the Flat Rate Scheme then the sales would form part of the Flat Rate turnover.
Please see below:
6. Determining your flat rate turnover
If you export goods overseas then this would normally be a zero rated supply if the export conditions are met.
These sales would still form part of the Flat Rate turnover even though the supplies are zero rated.
3. Conditions and time limits for zero rating
If item B is over £135 then import VAT is due and again this will form part of the Flat Rtae turnover when sold on to your customer.
If item B is under £135 and you are being charged VAT on the supply as a VAT registered customer then please contact the seller /marketplace.
Please see 'Business to Business ' section below:
Changes to VAT treatment of overseas goods sold to customers from 1 January 2021
Thank you. 





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Thank you for your reply, to clarify where goods are over £135 from china and china marketplace invoice has No mention of VAT etc, then should it be listed on the accounting/bookkeeping software as ''NO VAT"? As each transaction I have to specificy the correct tax code for VAT calculation. The SALES are part of the Flat Rate turnover. thank you

Hi R K,
The code ''NO VAT'' is specific to your software so HMRC cannot offer advice on this.
Thank you.

As you would agree I would not be able to leave the ''TAX code'' blank for the transaction, hence the query. Fully understand its software/bookkeeping related, but I believe this is how VAT is calculated by all accounting/bookkeeping softwares and then submitted to HMRC, therefore in good faith trying to get clarification on this matter. In short, if i select ''NO VAT'', my indivdual sales transactions would still be part of Flat Rate Turnover, so I am paying VAT on sales. However, excluding the purchase transaction from the VAT calculation. Is this the right way to do it please advise? I hope my explanation make any sense. Thank you

Hi R K,
I am unsure what the situation is here as you are referring to both sales and purchases for the same transaction. Is it a purchase or a sale? I would recommend calling the VAT Helpline on 0300 200 3700 so that we may discuss in depth. 
Thank you.

Yes indeed, item purchased from china marketplace over £135 value, delivered from CHINA to UK. The same item when sold to UK customer, shipped from UK to UK customer. The sale transaction is part of the Sales turnover, VAT is charged to customer, included in VAT calculation. However, the purchase (goods) transaction has no VAT details, which refer back to my post above. I would ring the helpful and try get further clarification, however the written response would be appreciated and hopefully would help others too reading this in future! thank you

If you are on the Flat Rate Scheme then you would not declare the purchase because you are unable to reclaim VAT on FRS so it would be correct in this case for the purchase to not appear on the VAT Return. However, which code you would need to use on your accounting software in order for this to happen is something that we cannot advise on.  Thank you.

excellent, many thanks thats all I wanted to clarify. thank you

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