Non-VAT Registered Store Selling Internationally? Beginner Advice Needed!

[James[D]]

Hi,

Im currently setting up a small clothing online store based in the UK.

Since the expected turnover is way below the required threshold I am not VAT registered, and therefore will sell my items to customers without any VAT.

Thats obviously fine inside the UK (and EU I believe), but what about to say the USA? Does that pose any problems at all? Or will they just get charged import duty + local tax (+ VAT??) when the package arrives?

Just want to make sure!
Thanks.

 

[DeanCo]

Yes, your customer pays the VAT and import duty according the rates in that country.

 

[James[D]]

Yes, your customer pays the VAT and import duty according the rates in that country.

Ok thanks for the reply DeanCo. So it sounds like it makes no difference whether Im VAT registered or not then.

 

[kulture]

It can make a huge difference. Check with your accountant. Let them do the maths. If you buy in stock from the UK and pay VAT on the supply, and then ship the majority out of the EU it MAY be that you would be better off being VAT registered. As you can claim back the VAT on the supply and do not have to charge VAT on the sales outside the EU.

 

[James[D]]

It can make a huge difference. Check with your accountant. Let them do the maths. If you buy in stock from the UK and pay VAT on the supply, and then ship the majority out of the EU it MAY be that you would be better off being VAT registered. As you can claim back the VAT on the supply and do not have to charge VAT on the sales outside the EU.

Thanks for the reply kulture. However, I am slightly confused now when you say "do not have to charge VAT on the sales outside the EU" when VAT registered. Does that mean when Im not VAT registered the opposite is true and I do have to charge VAT on sales outside the EU?

Lets say I have an item listed on my store for £95 (excl. VAT) with £5 international delivery (excl. VAT) and someone from the US buys it. What happens then exactly?

They pay £100 by credit card to my Paypal account, I send it off via Airmail from the Post Office and a couple of days later they receive it.

Then a few weeks later will they get a letter through the post from customs asking them to pay; UK VAT + US VAT + Import Duty??

How do customs know if my store is VAT registered or not? And how do they know how much to charge? Or do I have to declare that and the item values at the Post Office before despatching?

Im only expecting a very small percentage of sales to be international, but obviously want to make sure I do it correctly.

Thanks.