Ecommerce Finance

The £135 consignment rule: who accounts for UK VAT, and when the obligation falls on the seller.

For consignments of goods valued at <a href="https://www.gov.uk/guidance/vat-and-overseas-goods-sold-directly-to-customers-in-the-uk">£135 or less sold directly to UK consumers from outside the UK</a>, UK VAT is due at the point of sale, not as import VAT at the border. This rule catches dropshippers shipping low-value goods direct from overseas: they must register for UK VAT and account for supply VAT on each eligible sale from the first pound, with no registration threshold. The fork that changes the answer is whether the sale goes through a marketplace: <a href="https://www.gov.uk/guidance/vat-and-overseas-goods-sold-to-customers-in-the-uk-using-online-marketplaces">where it does, the marketplace accounts for the VAT</a> instead. Getting the direct-vs-marketplace fork wrong is the source of most non-compliance in the dropshipping cohort.

Key considerations.

The short answer: direct sale vs marketplace sale is the fork that changes everything

<a href="https://www.gov.uk/guidance/vat-and-overseas-goods-sold-directly-to-customers-in-the-uk">HMRC's guidance</a> is clear on the two routes:<ul><li>Direct sale (your own website, Shopify, WooCommerce): for consignments of £135 or less outside the UK sold direct to UK consumers, the seller must register for UK VAT and account for supply VAT at the point of sale. No registration threshold applies. The obligation exists from the first sale.</li><li>Marketplace sale (Amazon, eBay, Etsy): the marketplace is the deemed supplier and accounts for VAT on eligible sales. The seller is not liable for the VAT on those sales.</li></ul>The same seller can have both direct and marketplace sales with different VAT treatments applying to each channel simultaneously.

What the £135 threshold measures and what it does not

The £135 threshold applies to the value of the consignment of goods, not the shipping charge or any other ancillary cost. <a href="https://www.gov.uk/guidance/vat-and-overseas-goods-sold-directly-to-customers-in-the-uk">The HMRC guidance</a> describes the consignment value; do not improvise rules on whether shipping and insurance are included or how multi-item orders aggregate beyond what that source states. If your fulfilment model involves mixed consignment values, check the guidance directly or take advice, because the point-of-sale vs border distinction can flip within a single order depending on how goods are shipped.

Dropshippers shipping direct from overseas: the rule that catches most

A dropshipper who takes orders on their own website and fulfils directly from a Chinese, Indian or other overseas supplier to UK customers is selling direct, not through a marketplace. Every consignment of £135 or less is subject to supply VAT at point of sale, due from the seller, from the first sale. There is no £90,000 threshold that defers this obligation.Many dropshippers have been operating since 2021 without accounting for this VAT. The platform reporting rules that took effect from January 2024 mean HMRC now receives data on seller income from the platforms themselves; historic non-compliance is increasingly visible. If this position applies to you, see <a href="/services/hmrc-letter-online-sales">our HMRC letter response service</a> and consider a voluntary disclosure.

Above £135: standard import VAT at the border, and postponed VAT accounting

Consignments above £135 sent from overseas are outside the point-of-sale rule. Standard UK import VAT applies at the border. For VAT-registered sellers importing stock in consignments above £135, <a href="https://www.gov.uk/guidance/check-when-you-can-account-for-import-vat-on-your-vat-return">postponed VAT accounting</a> is available: instead of paying import VAT at the border and waiting to reclaim it, a VAT-registered importer declares and recovers it on the same VAT return. Full mechanics are on the <a href="/vat/postponed-vat-margin-scheme">postponed VAT and margin scheme page</a>. The below-£135 point-of-sale rule and the above-£135 border-import-VAT rule do not overlap.

How we help.

Import VAT obligation assessment for your fulfilment model

We assess whether the £135 rule creates UK VAT obligations for your specific fulfilment model: marketplace vs own website, sub-£135 vs above-£135 consignments, and the interaction with any FBA or 3PL stock you hold in the UK. Service: <a href="/services/ecommerce-vat-compliance">ecommerce VAT compliance</a>.

VAT registration and returns for direct-fulfilment sellers

We register direct-fulfilment sellers with HMRC for the point-of-sale VAT obligation and set up quarterly return processes, including the correct treatment of sub-£135 consignments across your sales channels.

Historic compliance review and voluntary disclosure

For sellers who have been fulfilling from overseas without accounting for VAT since January 2021, we review the historic position, quantify the liability and coordinate a voluntary disclosure to HMRC. Acting before HMRC contacts you materially improves the outcome. See also: <a href="/services/hmrc-letter-online-sales">HMRC letter response</a>.

Common questions

What is the £135 import rule?

For consignments of goods valued at £135 or less that come from outside the UK and are sold directly to UK consumers, UK supply VAT is due at the point of sale rather than as import VAT at the border. The rule applies from 1 January 2021. For direct sellers, VAT registration is required from the first pound of eligible sales. <a href="https://www.gov.uk/guidance/vat-and-overseas-goods-sold-directly-to-customers-in-the-uk">HMRC guidance</a>.

Does the £135 rule apply if I sell through Amazon or eBay?

No. Where a sale goes through an online marketplace, the marketplace is the deemed supplier and accounts for VAT on eligible sales. The £135 point-of-sale rule applies to direct sales: goods sold via your own website, fulfilled from overseas direct to a UK consumer. The same seller can have both channel types with different VAT treatments applying to each.

I dropship from China direct to UK customers. Do I need to register for UK VAT?

Yes, for consignments of £135 or less. You must account for UK VAT at the point of sale from the first pound of direct sales. There is no registration threshold for this obligation. If you also sell through a marketplace, the marketplace accounts for the VAT on those channel sales separately.

What happens above £135?

Consignments above £135 are outside the point-of-sale rule. Standard UK import VAT applies at the UK border. For VAT-registered sellers importing stock in above-£135 consignments, postponed VAT accounting removes the border cash payment; see <a href="/vat/postponed-vat-margin-scheme">the PVA and margin scheme page</a> for details.

Is the £135 rule the same as the EU's low-value threshold?

No. The UK £135 rule and the EU IOSS low-value regime are different figures, different directions of trade and different legal frameworks. They do not align. For UK sellers shipping goods to EU consumers, see <a href="/vat/ioss-vs-oss">IOSS vs OSS for UK sellers</a>.