Back in July 2021, the EU introduced the Import One-Stop Shop (IOSS) scheme. The aim of the scheme was to simplify VAT for non-EU based businesses involved in the sale of goods to consumers based in the EU.

If you’ve previously been put off selling goods in the EU due to factors like cost and impact on your operations and you trade in low value goods (less than €150/£135) with consumers in the EU — listen up for HMRC’s latest update.

What is the VAT IOSS scheme?

The IOSS scheme was introduced for companies based in non-EU countries (including Great Britain) involved in business-to-consumer (“B2C”) sales to customers based in the EU. It’s designed to streamline the way VAT is collected, declared and processed for online purchases of low-value goods (€150/£135 or less) imported into the EU.

The primary benefit of the scheme was that it enabled GB businesses to register for IOSS in one member state in the EU. This way, they could apply the rate of VAT on qualifying sales in the country where the goods were to be consumed, rather than registering for it in each individual member state. It also removed the burden of import and payment of import duties on the customer.

So, when a customer purchased goods, VAT was collected by the seller at the checkout, based on the applicable rate in the customer's EU member state. The seller would then report and remit the collected VAT to the tax authorities of the member state where they were registered for IOSS, using a single quarterly return.

Obstacles to using IOSS

Since the IOSS was introduced, the main obstacle UK businesses faced in selling goods to consumers in the EU was the need to register for the scheme in another EU country and appoint a fiscal representative — a requirement in most EU member states.

This meant that a third-party entity was responsible for paying all applicable EU VAT under the scheme, which could be expensive due to the level of risk and fiscal cost involved. Some UK sellers accepted these additional costs, but others were put off trading with consumers in the EU.

HMRC’s latest update

On 1 March 2024, HMRC announced that businesses in the UK that sell low value goods (£135 or less) in consignments to consumers in the EU, Northern Ireland or both, can register to use the IOSS with HMRC in the UK.

So, UK-based businesses can now benefit from an easier way to register for the IOSS via HMRC and be done with appointing agents or fiscal representatives in the EU. Businesses can also avoid issues such as language barriers and reduce overall costs.

To use the scheme you must:

  • Be based in a country outside the EU and Northern Ireland at the point of sale
  • Sell goods with a consignment value of £135 or less
  • Be selling goods to a consumer in the EU or Northern Ireland.

How can I join the HMRC’s IOSS?

You can apply to join the IOSS online using your business’s existing government gateway business tax account. After you’ve registered you’ll be issued with a unique 12-digit IOSS VAT identification number. This number will be included in your HMRC business tax account. Your registration for the scheme starts on the day you receive your IOSS VAT identification number.

However, if you’re already registered for the VAT IOSS scheme in another EU country, you’ll need to cancel your existing registration in that country before you apply to use HMRC’s IOSS scheme. We recommend applying for the UK scheme first — before you cancel your existing arrangements.

How to access your VAT IOSS scheme account

You can access the scheme through your HMRC business tax account and use it to pay the VAT due on your IOSS return, view your IOSS return and payment history and cancel or make changes to your registration.

For more information, including advice on whether or not joining the IOSS via HMRC will be beneficial for your business, please get in touch by email (VAT@ct.me) or phone (0131 558 5800).