Selling your products online to customers in Paris, Toronto, or Sydney sounds exciting — and it is. But the moment your goods or digital services cross a border, VAT becomes a genuine headache. Since Brexit reshaped the UK's relationship with the EU's VAT regime, and with HMRC's Making Tax Digital (MTD) programme tightening compliance expectations, UK small businesses face a more complicated picture than ever before. The good news is that once you understand the rules, they are entirely manageable. This guide walks you through the key obligations, threshold by threshold, market by market.
What Changed After Brexit: The Fundamentals
Before 31 December 2020, UK businesses selling to EU consumers benefited from the EU's distance selling thresholds — you only needed to register for VAT in another member state once your sales to that country exceeded a set amount (typically €35,000 or €100,000 depending on the country). Those days are gone. The UK is now a third country in the eyes of EU VAT law, which changes everything.
For goods sent from Great Britain to EU customers, the critical figure is €150. Consignments valued at or below €150 are subject to EU VAT at the point of sale, not at the border. Consignments above €150 are liable for import VAT and customs duties when they enter the EU — typically paid by the customer unless you opt for Delivery Duty Paid (DDP) terms. Getting this wrong means your parcel either sits in a customs warehouse or your customer receives an unexpected bill, neither of which is good for repeat business.
On the UK side, the government introduced its own £135 import consignment threshold in January 2021. For goods sold into the UK by overseas sellers valued under £135, UK VAT must be collected at the point of sale. If you are a UK seller dispatching within the UK, this does not directly affect you — but it is useful context when competing with overseas rivals who now have to charge UK VAT too.
Selling to EU Consumers: The One Stop Shop (OSS) Explained
The EU launched its One Stop Shop (OSS) scheme in July 2021 to simplify VAT compliance for businesses selling across EU member states. As a UK business, you are not based in the EU, so you would use the Non-Union OSS — registering in a single EU member state of your choice and using that registration to declare and pay VAT on all B2C sales across all 27 EU countries.
The practical benefit is enormous. Without OSS, selling to consumers in France, Germany, and Spain would theoretically require separate VAT registrations in each country once you breach their local thresholds. OSS collapses this into a single quarterly return filed in your chosen member state (Ireland and the Netherlands are popular choices for English-speaking businesses). You charge local VAT rates — 20% in France, 19% in Germany, 21% in Spain — and remit the whole lot in one go.
To register, you will need an EU VAT number from your chosen country. The registration itself is done online through that country's tax authority portal. Once registered, you must file OSS returns even in quarters where you have zero EU sales. Missing a return can lead to exclusion from the scheme, forcing you back to multiple local registrations — something worth avoiding at all costs.
It is worth noting that OSS only covers goods dispatched from the UK to EU consumers in consignments at or below €150. Higher-value shipments, and all B2B sales, fall outside the scheme and require separate treatment. If you store goods in an EU fulfilment centre (common with Amazon FBA), you will also need a local VAT registration in that country regardless of OSS.
Marketplaces as the Deemed Supplier: Amazon, eBay, and Etsy
One of the most significant shifts in global e-commerce VAT is the rise of the deemed supplier model. Under both UK and EU rules, large marketplaces are now required to collect and remit VAT on certain cross-border sales made through their platforms, rather than leaving it to the individual seller.
In the UK, Amazon, eBay, and similar marketplaces are deemed suppliers for goods sold by overseas sellers to UK customers where the consignment value is under £135. If you are a UK seller selling to UK customers through these platforms, this does not directly apply to you — you remain responsible for your own UK VAT. But if you sell internationally through these platforms, the marketplace may be collecting destination-country VAT on your behalf for those specific transactions.
The key practical point: do not double-charge VAT. If Amazon is collecting and remitting EU VAT on your sub-€150 sales to EU consumers, you should not also be charging VAT on those transactions. Review your marketplace seller agreements and tax settings carefully. Most platforms provide transaction-level reports showing where they have handled the VAT — download and reconcile these against your own records every quarter.
Selling Beyond the EU: US, Canada, Australia, and Other Markets
VAT — or its equivalent — does not stop at EU borders. Each major market has its own indirect tax system, and thresholds vary wildly.
- United States: There is no federal sales tax. Instead, each of the 50 states (and many localities) sets its own Sales Tax rate and rules. Most states now impose economic nexus thresholds — typically $100,000 in sales or 200 transactions per year — after which you must register and collect that state's sales tax. For UK businesses with modest US volumes, marketplace collection rules (similar to the UK's deemed supplier model) often handle this automatically on platforms like Amazon and Etsy.
- Canada: Canada operates a federal Goods and Services Tax (GST) of 5%, plus provincial sales taxes in many provinces. If your annual sales to Canadian consumers exceed CAD $30,000, you are required to register for GST. Some provinces have their own registration requirements on top.
- Australia: The Australian GST rate is 10%. Non-resident businesses supplying digital products or low-value imported goods (under AUD $1,000) to Australian consumers must register for GST once they exceed AUD $75,000 in annual sales to Australia.
The practical upshot: unless you are selling at significant volume to a specific non-EU country, marketplace deemed supplier rules will typically handle much of this for you. But as your business scales, specialist international VAT advice from an accountant with cross-border experience becomes a worthwhile investment.
Record-Keeping, MTD, and Staying Compliant
Whatever markets you sell into, your underlying record-keeping must be watertight. HMRC expects you to maintain clear evidence of the destination of each sale, the VAT treatment applied, the exchange rate used, and the VAT collected or relieved. For businesses already within the MTD for VAT regime — mandatory for all VAT-registered businesses since November 2022 — this means your accounting software must be capable of handling multi-currency transactions and producing a compliant VAT return without manual re-keying.
This is where having the right tools genuinely matters. BizHub365 is built specifically for UK small businesses and includes MTD-compliant VAT filing with direct HMRC API submission — no bridging software required. Its multi-currency invoicing and AI-powered receipt scanning help ensure that overseas sales are recorded correctly from the moment a transaction is made, reducing the risk of errors creeping into your VAT return. If you manage sales across Shopify, eBay, Amazon, or Etsy, BizHub365's multi-channel stock and sales sync means your transaction data flows into one place rather than being scattered across separate spreadsheets.
Whichever software you use, make a habit of reconciling your marketplace VAT reports with your accounting records monthly, not just at quarter end. Cross-border VAT investigations by HMRC can go back four years, and the penalties for careless errors — let alone deliberate ones — can be substantial.
Conclusion: Get the Foundations Right and Grow with Confidence
Cross-border e-commerce is one of the most exciting opportunities available to UK small businesses. A customer in Munich or Melbourne is just as reachable as one in Manchester. But VAT compliance is the unglamorous price of admission to international markets, and ignoring it rarely ends well. The key steps are straightforward: understand the thresholds that trigger your obligations in each market, register for OSS if you are selling B2C into the EU at volume, lean on marketplaces' deemed supplier rules where they apply, and keep meticulous records. Get those foundations right and you can grow your international sales with genuine confidence — rather than a nagging worry that HMRC or a foreign tax authority is about to come knocking.