Hi Andrew,

I’m in the development stages of starting an eCommerce business. I’m from the UK but currently living in Hong Kong – my partner is based in the UK.

I’m looking to sell worldwide, shipping from Hong Kong, initially concentrating on the UK. I understand that anything imported that is over £18 (£15 from November) is subject to VAT. My products will range from £10-£50.

Do I need to register for VAT, and pass this on to my customers? This will obviously eat into my profit margins. What about other jurisdictions?

Thanks,
Kasey

Hi Kasey,

Thanks for your question.

First of all – you haven’t explained where you’ll base your business structure – in UK or Hong Kong? This is very important as it radically changes your situation with taxes.

If you register a company or work as a self employed/sole trader in HK and open PayPal account there, make invoices etc., you can’t do much about VAT your customers will face when receiving goods in UK. Your customers will be charged VAT & import (higher value items) by a courier company.

If your partner creates a company in UK, there are more options available. You can ship goods to UK in bulk and then send out to customers as sales come in OR you can have a UK company but still send each parcel from HK. In first case, your UK company will pay VAT when receiving shipment of goods so your customers won’t be facing any tax payments. Do not register for VAT until you reach the max limit!

If you have a UK company AND still send from HK directly to customers, situation is more complicated and to be perfectly honest, I would contact HMRC with advice on what you’ll have to do taking into consideration both scenarios (if you’re VAT registered and not).

Thanks,
Andrew

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