United Kingdom · VAT

UK VAT vs EU VAT After Brexit: Key Differences for Cross-Border Sellers

Since Brexit, the UK and EU run two separate VAT systems. Here are the key differences in registration, imports, OSS/IOSS, digital services and refunds that every cross-border seller needs to know.

UK VAT vs EU VAT after Brexit: the big picture

Before 1 January 2021, the UK was part of the EU VAT area. Goods moved freely as intra-Community supplies, and businesses relied on shared rules such as distance-selling thresholds and a single set of EU directives. After Brexit, the UK left the EU VAT regime entirely.

The practical result is simple but far-reaching: the UK is now a “third country” for EU VAT purposes, and the EU is a third country for UK VAT purposes. Movements of goods that were once intra-EU trade are now imports and exports, with customs declarations, import VAT, and potentially duty.

1. Two separate VAT systems and two registrations

The most fundamental change is that the UK and EU now maintain independent VAT frameworks:

• UK VAT is governed by HMRC under UK law, with a standard rate of 20%, a reduced rate of 5%, and a zero rate for certain goods.
• EU VAT is governed by each member state under the EU VAT Directive, with standard rates ranging from 17% (Luxembourg) to 27% (Hungary).

If you sell in both markets, you may need a UK VAT registration and one or more EU VAT registrations, depending on where you hold stock and how you sell. There is no longer a single threshold that covers both blocs.

2. Imports and exports replace intra-EU movements

Goods crossing the UK–EU border are now subject to customs formalities:

• Exports are generally zero-rated for VAT, but you must hold evidence of export.
• Imports trigger import VAT (and possibly customs duty) in the country of arrival.

To ease cash flow, the UK introduced Postponed VAT Accounting (PVA), which lets VAT-registered importers account for import VAT on their VAT return rather than paying it at the border. Several EU states offer similar import VAT deferment schemes, but the rules differ by country.

3. The EU VAT e-commerce package: OSS and IOSS

In July 2021 the EU overhauled VAT for cross-border B2C sales. Two schemes now dominate distance selling:

• One-Stop Shop (OSS) – lets EU-based sellers report VAT on B2C sales across all member states through a single return, replacing the old per-country distance-selling thresholds with one EU-wide threshold of €10,000.
• Import One-Stop Shop (IOSS) – lets sellers of imported goods valued at €150 or less collect VAT at the point of sale and report it through one monthly return, avoiding import VAT at the border.

Because the UK is outside the EU, many UK sellers must use IOSS (often via an intermediary) to sell low-value goods smoothly into the EU. The old €22 low-value import VAT exemption was abolished, so VAT now applies to virtually all imported goods, regardless of value.

4. Low-value goods into the UK

The UK mirrored part of this approach. For consignments of goods valued at £135 or less sold to UK customers, the seller (or online marketplace) must charge UK VAT at the point of sale and register for UK VAT – rather than VAT being collected at import. Above £135, normal import VAT and duty rules apply.

5. Online marketplaces became VAT collectors

Both regimes now make marketplaces responsible for VAT in many scenarios. Platforms such as Amazon and eBay are deemed the supplier for certain B2C sales – collecting and remitting VAT on behalf of sellers. This deemed-supplier rule applies in both the UK (for goods ≤£135 and for non-UK sellers) and the EU (for imported goods ≤€150 and for non-EU sellers).

6. Digital services: UK VAT MOSS is gone

Before Brexit, UK businesses selling digital services to EU consumers used the UK’s VAT Mini One-Stop Shop (MOSS). That access ended with Brexit. Now a UK business selling digital services to EU consumers must either register for the Non-Union OSS in an EU member state or register for VAT in each country where it has customers. Conversely, EU businesses selling digital services to UK consumers must register for UK VAT from the first sale – there is no UK threshold for non-established sellers.

7. Reclaiming VAT across the border

The convenient EU electronic VAT refund system no longer applies to UK businesses. To reclaim VAT incurred in the EU, UK companies must use the 13th Directive paper-based refund process in each member state. EU businesses reclaiming UK VAT use HMRC’s overseas refund scheme. Both routes are slower and more administrative than the old system.

8. Northern Ireland: a special case

Under the Northern Ireland Protocol (now the Windsor Framework), Northern Ireland remains aligned with EU VAT rules for goods while staying part of the UK VAT system for services. This dual status means NI businesses can hold an “XI” VAT number for EU goods trade. If you move goods to or through Northern Ireland, check the specific rules carefully – they are among the most complex in the post-Brexit landscape.

Conclusion

The core difference between UK VAT and EU VAT after Brexit is that you are now dealing with two independent systems, two sets of registrations, and a hard customs border. Cross-border sellers face more paperwork, but schemes like OSS, IOSS, and Postponed VAT Accounting exist to keep trade flowing. Getting your registrations and customs data right from the start is the single best way to stay compliant and competitive in both markets.