Do I need to register for and collect VAT?

I hope this message finds you well. I am in the process of setting up an online (dropshipping) business as a Sole Trader in the UK. To provide context for my question, here's a brief overview of my business setup: 1. Business Structure: Sole Trader 2. Annual Turnover: Projected to be below the £85,000.00 VAT threshold. 3. E-commerce Platform: Utilizing Shopify for the online store 4. Fulfillment Service: Using Zendrop for order fulfillment My query pertains to the requirement to collect VAT given my business structure and relationships with Shopify and Zendrop. Specifically, as my projected annual turnover is below the £85,000.00 threshold, am I obligated to collect VAT on sales? Additionally, how does my association with Shopify and Zendrop impact my VAT obligations, if any? I appreciate your guidance on this matter and any clarification you can provide. Thank you. PS: For clarity, here is some additional information. Zendrop's Role: Zendrop is a third-party order fulfillment service that enhances the efficiency of my business by managing order processing and shipping logistics. Here's an overview of how it works: 1. Order Processing: When a customer places an order on my Shopify website, I order the product for them via Zendrop. I do not hold inventory. 2. Product Sourcing: Located in Austin, Texas, United States, Zendrop serves as the intermediary responsible for sourcing the ordered products. 3. Shipping to Customer (DDP): Zendrop takes charge of the packaging and shipping process, ensuring that the product reaches the customer's doorstep. Notably, they operate on a Delivery Duty Paid (DDP) basis, managing duties, taxes, and shipping fees associated with international deliveries. 4. Tracking and Reporting: Zendrop typically provides comprehensive tracking information and regular order status updates, enabling both me and my customers to monitor the shipment's progress.

Hi,

Your UK taxable turnover is made up of the supplies which you make in the UK. If the value of the imports are over £135 and you are not the importer of record then normally the consumer would become responsible for paying any import VAT applicable. As you are not the importer then you do not own the goods in the UK and so you would not be making a taxable supply in the UK.

For goods below a value of £135 then there will be a supply made to you by the seller and then a supply made by you to the end consumer. If you are not VAT registered then we would expect the supplier to charge you VAT on these goods. Your supply to the end user would then be a UK supply and this will count towards your taxable turnover. You can see the information below relating to this:

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

Thank you.

Thanks for your reply. So if I follow correctly, you are saying that I do not need to register for or collect VAT?

Hi Dr_K001,
If you belong in the UK then you would only need to register for VAT if you are trading above the 85K threshold.
Please see the guidance below:
Who should register for VAT (VAT Notice 700/1) 3. Working out whether you need to register
Thank you.