VAT for dropshipped goods

I am a UK based sole-trader who is not VAT registered. My supplier is Canadian company with no UK VAT registration. My customer is a UK based VAT registered company. I bought the following goods from the Canadian company with an invoiced value of: A (200 GBP), B (50 GBP) and C (48 GBP). I have invoiced my UK customer for A, B and C at cost price + a mark-up. The Canadian supplier is delivering the goods directly to the UK customer with my EORI on record. A+B+C = 300 GBP which is >135 GBP and thus the courier would charge me VAT. No problem. PROBLEM: The Canadian supplier has shipped A+B (250 GBP) in one box and C (48 GBP) in a separate box. As C is below the 135 GBP consignment limit, I am worried that the courier company will not charge me VAT on this item and that I or my Canadian supplier will in effect be breaking the law. QUESTION: Can I ask the courier to consider A+B+C as a single consignment and thus charge me VAT on their total value given that I have a single invoice with all three goods on them?

Hi Import duty but not import VAT is relieved for goods below £135 . Therefore as you are not VAT registered you should be charged VAT on the whole value. Whether import duty should also be charged had the order been combined will depend on the goods classification and duty rate applicable and also whether the goods are eligible for duty free entry under the UK -CA free trade agreement. You need to make sure you are complying with this requirement. https://www.gov.uk/government/publications/changes-to-vat-treatment-of-overseas-goods-sold-to-customers-from-1-january-2021/changes-to-vat-treatment-of-overseas-goods-sold-to-customers-from-1-january-2021

"Import duty but not import VAT is relieved for goods below £135 ." Where specifically does the gov.uk website say this? There are no duties on the goods, only vat. The guidance quited below is confusing to me. It implies that for goods under 135 GBP the courier does not have to charge VAT at import. However in my scenario item C is part of a larger order over 135, it just so happens to have been shipped separately. Will the courier understand this and still charge import vat. I need this to happen as I do not want to become vat registered and am replying on the courier to carry out vat collection. "For imports of goods from outside the UK in consignments not exceeding £135 in value (which aligns with the threshold for customs duty liability), we will be moving the point at which VAT is collected from the point of importation to the point of sale. This will mean that UK supply VAT, rather than import VAT, will be due on these consignments."

Hi chemhero123,
If the import of box C is a separate supply and is imported separately to the other boxes then the treatment of the import would be different as the value is under the value of £135.
If this is the case then it would be the reposonsibility of the supplier to register for VAT in the UK and to charge you the VAT on the value of the goods.
However, if they should all be part of one consignment then the import VAT should be charged on the full value of the whole consignment.
Thank you. 

 

Dear HMRC admin, The supplier invoiced me for A B and C together on one invoice. I paid for A B and C together. A and B were shipped together. C was shipped separately. Does this qualify as one supply?

Hi chemhero123,
As you stated the courier should not be charging VAT on supplies of goods below £135 as it is not subject to import VAT, instead it is the responsibility of the supplier to account for this VAT.
As per the guidance below the value of £135 is based on a consignment of goods so I would recommend contacting the shipping agent to establish what constitutes this particular consignment.
Changes to VAT treatment of overseas goods sold to customers from 1 January 2021
Thank you.

 

Hi,

The £135 limit applies to the value of a total consignment that is imported, not the separate value of individual items that are in a consignment.

You will need to speak to the shipping company regarding how these goods have been treated for import purposes when they have come in separately.

Thank you.