NETP Did Not Pay VAT (Reverse Charge)

Hi All, A UK non-established Limited Liability Company (NETP) selling at an online marketplace in UK was under impression that it is UK Established and can ask online marketplace not to charge VAT on those services which are being invoiced by the marketplace outside UK branch. Now the NETP came to know that the reverse charge is only applicable to a company in the UK who is established(belong) in the UK. My Question is will the UK non-established Limited Liability Company (NETP) has to pay this VAT to online marketplace for correction of record? Is there any penalty as well? Thanks

Hi Amazo,
I'm not sure if you are referring to a situation involving the import of goods below a value of £135.
If you are please see the guidance below:
VAT and overseas goods sold directly to customers in the UK
Thank you.

Hi, Sorry if I was not clear about my situation. My client has a UK Limited Company but since he does not have UK establishment, he is considered as Non-Established by Amazon. Since the client does not have UK establishment, therefore, it is considered as Overseas Seller. As per UK VAT on Ecommerce Legislation (2021), and as per "VAT and overseas goods sold to customers in the UK using online marketplaces" https://www.gov.uk/guidance/vat-and-overseas-goods-sold-to-customers-in-the-uk-using-online-marketplaces "Goods that are in the UK at the point of sale Importing goods to sell through online marketplaces The overseas seller will remain liable for any import VAT and Customs Duty when the goods are first imported into the UK. When the goods are sold to the customer, the overseas seller will be considered to have made a zero-rated supply of the goods to the online marketplace, known as a ‘deemed supply’. The overseas seller does not have to issue invoices to the online marketplace for deemed supplies that are considered to be zero-rated. UK VAT will be charged at the point of sale. The online marketplace will be liable to account for the VAT on the sales made through its marketplace by a seller not established in the UK. Where the goods are located in Northern Ireland at the point of sale and sold to a customer in Northern Ireland, the online marketplace will be liable for the VAT where the seller is not established in the UK and EU. The seller remains liable for the VAT where the goods are for a business customer who gives them their UK VAT registration number. Overseas sellers who only make zero-rated deemed supplies can either: register for VAT if they are not already registered apply for exemption from registration for VAT" Questions: As per this guideline, can you please confirm my following understandings; Question 1: The sales from overseas sellers to Amazon will be treated as DEEMED SUPPLY and charge ZERO-RATED VAT. It means seller will charge 0% VAT to Amazon? Question 2: The sales from Amazon to buyer will be charged at 20% VAT. Amazon will collect that 20% VAT and remit it to HMRC showing as its own revenue as it is Amazon Obligation? Question 3: The seller is selling household items which are not ZERO VAT items. But still the sales from overseas sellers to Amazon which is treated as DEEMED SUPPLY will have 0% VAT charge to Amazon. Is it correct? Thank you.

Hi,

Your understanding of these processes are correct. In all of these scenarios the marketplace is responsible for the VAT and if the item carries a VAT rate of 20% then the overseas seller will make a deemed Zero rated supply and the marketplace will make a 20% supply to the end customer. You can see guidance here:

Changes to VAT treatment of overseas goods sold to customers from 1 January 2021

Thank you.