VAT on Distance Sales to EU Customers

Introduction

If you sell goods online to consumers in the EU or Northern Ireland, special VAT rules apply depending on where your goods are located when sold and their value. The Import One Stop Shop (IOSS) scheme allows you to collect and pay VAT on low-value imports through a single monthly return, simplifying your obligations across multiple EU countries.

What is the IOSS scheme?

The Import One Stop Shop (IOSS) is a VAT scheme for businesses that sell goods to consumers in the EU or Northern Ireland. You can use it when your goods are located outside the EU and Northern Ireland at the point of sale, and each consignment is worth £135 or less.

The scheme allows you to charge the correct VAT rate to your customer at the point of sale, then report and pay all the VAT due to HMRC in a single monthly return—rather than registering for VAT in multiple EU countries.

Who can use the IOSS scheme?

You can register directly for the IOSS scheme if your business is in:

• Northern Ireland (check if your business qualifies as being in Northern Ireland for VAT purposes)
• Norway (the only non-EU country with a recognised mutual assistance agreement for VAT recovery)

If your business is in Great Britain or any other country outside the EU and Northern Ireland, you cannot register directly. Instead, you must appoint an intermediary to register and act on your behalf.

To register, you must already be registered for UK VAT.

What sales qualify for IOSS?

The IOSS scheme covers sales where:

• Goods are located outside the EU and Northern Ireland when you sell them
• The consignment value is £135 or less
• You're selling to consumers (not VAT-registered businesses)
• The goods are being imported into the EU or Northern Ireland

What you cannot include

You cannot use IOSS for:

• Consignments containing excise goods (alcohol and tobacco)
• Sales of goods already located in Great Britain at the point of sale to consumers in Northern Ireland (these go on your UK VAT return)
• Sales from the Isle of Man to Northern Ireland (these also go on your UK VAT return)
• Sales to VAT-registered businesses
• Goods worth more than £135 per consignment

If you only sell through online marketplaces, the marketplace is usually responsible for collecting and paying the VAT—not you.

Working out the consignment value

The consignment value is the sale price of the goods, excluding:

• Transport and insurance costs (unless included in the price and not shown separately on the invoice)
• Any taxes and charges

If you're sending multiple items in one consignment, add up the individual values to get the total consignment value.

How the IOSS scheme works

Once registered, you'll receive a unique 12-digit IOSS VAT identification number. You must:

1. Charge the correct VAT rate – use the VAT rate that applies in the EU country or Northern Ireland where your customer is located

2. Include your IOSS number on customs declarations – ensure your IOSS number appears on the declaration for each consignment

3. Keep detailed records – maintain records for each sale for 10 years

4. Submit monthly returns – complete and submit a return by the last day of the month following each tax period (for example, the January return is due by 28 or 29 February)

5. Make monthly payments – pay the total VAT due to HMRC in one payment

Monthly returns

You must submit a return every month, even if you made no eligible sales. If you make no sales, you submit a nil return.

Each return must include:

• All sales to each EU country and Northern Ireland
• The total value of sales (excluding VAT) at each VAT rate
• The total VAT charged at each rate

You must convert any foreign currency amounts to pounds sterling using the exchange rates published by the European Central Bank on the last day of the relevant month.

Deadlines and penalties

Returns and payments are due by the last day of the month following the tax period. For example:

• January sales: return and payment due 28/29 February
• February sales: return and payment due 31 March
• December sales: return and payment due 31 January of the following year

If you miss a deadline, HMRC will send you a reminder 10 days later. You then have 10 days to submit your return or payment. If you miss the deadline for three consecutive periods, you'll be excluded from the scheme for a minimum of two years.

Correcting mistakes

You cannot change a return once submitted. Instead, you must include any corrections in your next return or a later one. You have three years from the original due date to correct errors.

When completing your next return, you can:

• Adjust the total VAT amounts previously declared for each country
• Add VAT amounts you forgot to include on an earlier return

If you over-declare VAT on sales to Northern Ireland, HMRC will issue a refund. If you over-declare VAT on sales to an EU country, that country's tax authority handles the refund.

Records you must keep

For each sale, keep records of:

• The country where you made the sale
• Description and quantity of goods
• Date of supply
• Taxable amount and currency used
• Any increases or decreases to the taxable amount
• VAT rate applied
• Amount of VAT due and currency used
• Payment dates and amounts
• Invoice information
• Evidence of where the goods were dispatched to and where transport ended
• Proof of any returned goods
• Order numbers

You must keep these records for 10 years and be able to send them to HMRC electronically if requested.

Previous IOSS or OSS registrations

You can only be registered for one IOSS scheme at a time. If you're already registered in an EU country, you must cancel that registration before applying with HMRC.

If you've been excluded from any One Stop Shop scheme (OSS or IOSS) for non-compliance, you cannot register for IOSS again for two years.

If you submit nil returns for two years

If you submit a nil return each month for two years, HMRC will automatically cancel your registration.

How to register

You must register online using the same sign-in details you used when you registered for UK VAT. You'll need:

• Your permanent place of business address, telephone number and email address
• Details of any EU country where your business is registered for VAT or tax, including addresses and registration numbers
• Details of any previous IOSS or OSS registrations in EU countries
• Your bank details, including Bank Identifier Code (BIC) and International Bank Account Number (IBAN)

Your registration starts on the day you receive your IOSS VAT identification number, which will appear in your HMRC business tax account.

Sources

• Check if you can register for the VAT Import One Stop Shop scheme
• Register for the VAT Import One Stop Shop scheme
• Completing an Import One Stop Shop VAT return
• Submit your Import One Stop Shop VAT return

This article provides general guidance based on current HMRC rules. For advice specific to your situation, speak to your accountant.