UK based company - dropshipping from China

[Tomhunventure]

Hi everyone,
This is Tom. I've a UK based business.
I'm new on the market, and I don't want to be VAT registered voluntarily, so I'm wondering, how is it possible to manage "dropshipping from China all around the world (mainly UK and USA)" process (without VAT registration)
Is it possible without VAT registration at all ?

 

[Mr D]

Yes.
Until you start hitting thresholds. Different countries have different distance selling thresholds in Europe.

 

[Tomhunventure]

Yes.
Until you start hitting thresholds. Different countries have different distance selling thresholds in Europe.

You mean to hit the VAT registration threshold? in UK based business case it is 80 000 pounds/year .

 

[Mr D]

You mean to hit the VAT registration threshold? in UK based business case it is 80 000 pounds/year .

Selling in the UK you may find buyers from other countries purchasing too.

Watch out for returns and refusal of delivery.

 

[MarkHenry19]

Helpful thread! I was searching for the same information. Thanks a lot.

 

[CHUKTC]

If you are shipping in any volume to the UK you will require an EORI number. Its free and you can apply to HMRC to get it https://www.gov.uk/eori but there is a catch - you need to register for VAT so contrary to the above advice I think you will find you do need to register for VAT

 

[Deleted member 302361]

if you are operating at below the financial level that requires vat registration then you can use this form www.tax.service.gov.uk/shortforms/form/EORINonVATImport

 

[Mr D]

If you are shipping in any volume to the UK you will require an EORI number. Its free and you can apply to HMRC to get it https://www.gov.uk/eori but there is a catch - you need to register for VAT so contrary to the above advice I think you will find you do need to register for VAT

Is that a new thing?

I have an EORI have used multiple times for importing stuff. Without needing to register personally to charge myself vat.

 

[Deleted member 302361]

Is that a new thing?

I have an EORI have used multiple times for importing stuff. Without needing to register personally to charge myself vat.

There has always been the facility, in the UK, for non-VAT registered businesses to import and Export

 

[Mr D]

There has always been the facility, in the UK, for non-VAT registered businesses to import and Export

Yes that was the impression I had from own experience but been a while since imported using it.

 

[light after the dark]

I had spoke to HMRC about dropshipping into the UK recently (i'm also waiting for a written reply) but from what they have said to me.

**applies to drop-shippers only - this does not cover importing goods for sale at markets, in store or importing to yourself/storage and then sending them on to your customers.**

you don't need an EORI as a dropshipper as technically you are not the importer, you customer is. This is because you never have physical possession of the goods and they go from your supplier abroad straight to your customer. It's your customers name on the parcel.

What this also means is that you customer is legally liable for and VAT and DUTY charges upon the goods arrival in the UK. You can put this in your "shipping terms" and ask them to contact you to organise a refund for anything they have had to pay.

For goods coming from outside of the EU, VAT applied to Goods above £15 in value is the threshold I believe) and Customs duty for good valued above £135 (includes shipping, insurance costs applied to the good).

You don't have to be VAT registered to have a EORI number nor do you need to have a EORI as a drop-shipper only.

I have suggested to HMRC that they create a drop-shippers number similar to the EORI that would take the liability away from your customers, but this would only work if the suppliers abroad make sure this number is on the package every-time.

I hope this helps and please do correct me if your aware of anything different/incorrect.

 

[Deleted member 302361]

Well if that is what HMRC has advised, and they are confirming in writing then you are good to go. I doubt they will create an EORI category for this scenario as the liability lies with the customer.

 

[Mr D]

I had spoke to HMRC about dropshipping into the UK recently (i'm also waiting for a written reply) but from what they have said to me.

**applies to drop-shippers only - this does not cover importing goods for sale at markets, in store or importing to yourself/storage and then sending them on to your customers.**

you don't need an EORI as a dropshipper as technically you are not the importer, you customer is. This is because you never have physical possession of the goods and they go from your supplier abroad straight to your customer. It's your customers name on the parcel.

What this also means is that you customer is legally liable for and VAT and DUTY charges upon the goods arrival in the UK. You can put this in your "shipping terms" and ask them to contact you to organise a refund for anything they have had to pay.

For goods coming from outside of the EU, VAT applied to Goods above £15 in value is the threshold I believe) and Customs duty for good valued above £135 (includes shipping, insurance costs applied to the good).

You don't have to be VAT registered to have a EORI number nor do you need to have a EORI as a drop-shipper only.

I have suggested to HMRC that they create a drop-shippers number similar to the EORI that would take the liability away from your customers, but this would only work if the suppliers abroad make sure this number is on the package every-time.

I hope this helps and please do correct me if your aware of anything different/incorrect.

Your customers can also refuse to take delivery of goods with VAT plus admin charge to pay. Then contact you for a full refund including shipping costs. What happens to the goods is your problem then.

 

[light after the dark]

Your customers can also refuse to take delivery of goods with VAT plus admin charge to pay. Then contact you for a full refund including shipping costs. What happens to the goods is your problem then.

I know, I don't like the prospect of that either but HMRC have no facility here for drop-shipping into the UK. hence why few do it and most target the US markets instead. As much as it is a pain, I do offer to refund any costs hit by landing in the UK and as long as my goods are under the threshold I shouldn't need to, but does limit what you can sell and for how much, just to avoid it.

 

[Mr D]

I know, I don't like the prospect of that either but HMRC have no facility here for drop-shipping into the UK. hence why few do it and most target the US markets instead. As much as it is a pain, I do offer to refund any costs hit by landing in the UK and as long as my goods are under the threshold I shouldn't need to, but does limit what you can sell and for how much, just to avoid it.

Few?
Plenty do it. Just has some risks.

Problem you would have even with keeping goods below threshold is people wanting multiples.
I sell mostly single items, a few I put into packs too. Probably 20% of my orders are for multiples - half my orders so far today are multiples.

 

[light after the dark]

Few?
Plenty do it. Just has some risks.

Problem you would have even with keeping goods below threshold is people wanting multiples.
I sell mostly single items, a few I put into packs too. Probably 20% of my orders are for multiples - half my orders so far today are multiples.

Now i'm interested, what you typical price bands and how do you deal with customs and vat? I'm relatively new to it so always learning. what I've wrote is what I've found so far that's a potential issue (depends how customer reacts to be fair)

 

[CharlieT UK]

Interesting thread, thank you for the information. I am starting a dropshipping business, I want to incorporate a limited company in the UK and source suppliers from all over the EU, including UK, Italy, and maybe even outside the EU if I like what they produce. What EORI number would I need to apply for in this case?
Also, if I don't want my supplier to ship directly to my customers, can I have the goods sent somewhere nearby where I or my associates live and have the goods sent from there to the customer?

 

[japancool]

Interesting thread, thank you for the information. I am starting a dropshipping business, I want to incorporate a limited company in the UK and source suppliers from all over the EU, including UK, Italy, and maybe even outside the EU if I like what they produce. What EORI number would I need to apply for in this case?

You don't need an EORI number.

Also, if I don't want my supplier to ship directly to my customers, can I have the goods sent somewhere nearby where I or my associates live and have the goods sent from there to the customer?

You need an EORI number.

 

[CharlieT UK]

You don't need an EORI number.



You need an EORI number.

Thank you Japancool

 

[business_hero]

How about VAT (irrespective of the VAT threshold) if a UK limited’s customers are based in the EU or US but supplier ships from China directly to the customer?
Is VAT always payable in the UK?

 

[japancool]

How about VAT (irrespective of the VAT threshold) if a UK limited’s customers are based in the EU or US but supplier ships from China directly to the customer?
Is VAT always payable in the UK?

No. Local VAT will be payable in the EU, but the USA has much higher thresholds ($800, I think), before duty is applied. I don't know about state sales tax though.

 

[business_hero]

So the limited would have to submit VAT returns in all of the countries where customers are located?
In which scenario would the UK limited be able to charge UK VAT to international customers or even apply zero rated VAT?

How do stores then generally deal with global shipping? A lot of stores do offer that..

 

[japancool]

So the limited would have to submit VAT returns in all of the countries where customers are located?

No. Generally, VAT will be collected from the buyer on import. You do not charge VAT on sales to customers outside the UK.

 

[business_hero]

Ok. But in this case, the supplier will have to know what price the Limited sold the good to the customer for? Otherwise, would be embarrassing if the customer sees the price the supplier charged.

Also, how would it change if the supplier has fulfilment hubs in the EU (for example), ie has already imported the products?