This article outlines key VAT considerations for overseas sellers selling goods on TikTok Shop to UK customers.
TikTok Shop operates as an online marketplace (OMP) connecting sellers with UK customers. An OMP is a business that uses a website or mobile app to allow third parties to offer goods for sale, and is involved in setting the sales terms, processing or enabling payments, and ordering or delivery of goods.
Since the post Brexit VAT changes introduced in 2021, OMPs have specific responsibilities for collecting and accounting for VAT on sales made to UK customers. These rules are particularly relevant for overseas sellers, whether they ship goods from outside the UK or hold stock within the UK.
What is an Overseas Seller or a Non-Established Taxable Person (NETP)?
For VAT purposes a business has a UK establishment if either of the following applies:
- Its key management decisions and central administration take place in the UK.
- It has a permanent physical presence in the UK with the people and equipment needed to make or receive taxable supplies.
In practice, consider where the business is run on a day to day basis. This is usually where its principal place of business is located.
If the business does not have a UK establishment, it is treated as an overseas seller or NETP.
HMRC Guidance on OMP VAT Responsibilities
HMRC guidance confirms that when an OMP facilitates a sale to a UK customer, the marketplace may be treated as the supplier and must collect and account for UK VAT. This applies differently depending on whether the sale is to a consumer (B2C) or a UK VAT registered business (B2B).
For overseas sellers, the key scenarios are:
1. Goods outside the UK at the point of sale for consignments not exceeding £135
Where goods are outside the UK at the point of sale and the consignment is valued at £135 or less, the OMP must collect and remit UK VAT at checkout.
The overseas seller is treated as making a deemed supply to the OMP outside the UK, which is outside the scope of UK VAT. The OMP is then treated as selling the goods to the customer in the UK.
For B2C sales or sales to a non VAT registered business, the OMP must charge and account for UK VAT.
Where the UK business customer provides a valid UK VAT registration number, the reverse charge applies and the customer accounts for the VAT. If no VAT number is provided, the sale is treated as B2C and the OMP must collect VAT.
2. Goods located in the UK at the point of sale (any value)
If an overseas seller stores stock in the UK and sells through an OMP, the marketplace must collect VAT on B2C sales. At the point of sale to the customer, the overseas seller is treated as making a zero rated supply of the goods to the OMP. This allows the overseas seller to register for UK VAT and reclaim any import VAT paid when bringing the goods into the UK, in accordance with the normal rules for VAT recovery.
For B2B sales, the customer must give a valid UK VAT registration number. In these cases, the overseas seller accounts for VAT directly.
Since overseas sellers have no UK registration threshold, they must register for UK VAT as soon as they hold stock in the UK for sale.
TikTok Guidance
TikTok’s published guidance aligns with the HMRC framework but focuses mainly on overseas sellers dispatching goods from outside the UK.
TikTok includes VAT within the total selling price shown to the customer. For overseas sellers:
- TikTok collects and remits UK VAT on orders valued at £135 or less where goods are located outside the UK.
- For orders over that threshold, VAT is collected at import by HMRC from the buyer depending on the incoterms.
TikTok has not yet published explicit guidance covering sales where overseas sellers hold stock in the UK. HMRC rules indicate that TikTok should account for VAT on B2C sales in these cases, but TikTok has not formally confirmed how it applies the deemed supplier rules for UK based stock.
Invoicing for Commissions and Services
For invoices issued by TikTok entities to overseas sellers, the VAT treatment depends on the entity issuing the invoice. For example, where a UK TikTok entity such as Perceiver Limited provides services to a non UK established seller, the invoice is subject to the reverse charge. The buyer accounts for VAT under reverse charge rules.
Overseas sellers should review each TikTok invoice and apply VAT in line with the rules in the relevant country.
Key Points for Overseas Sellers Using TikTok Shop
For overseas sellers dispatching goods from outside the UK, TikTok is responsible for collecting VAT on low value consignments. However, TikTok’s current guidance does not fully address sales where overseas sellers hold stock in the UK.
Overseas sellers should review their VAT position carefully, especially when storing goods in the UK or selling to business customers and ensure they meet their obligations for UK VAT registration, invoicing, and VAT accounting.
For further advice on VAT considerations for overseas sellers, including your responsibilities when using platforms like TikTok Shop, please contact one of our experts.
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