VAT Import One Stop Shop (IOSS) Scheme for UK Businesses and Intermediaries

Overview of the IOSS Scheme: The IOSS scheme simplifies VAT declaration and payment for businesses selling low-value goods (valued at £135 or less) imported from outside the EU and Northern Ireland to consumers in the EU or Northern Ireland. Registered businesses can declare and pay VAT through a single monthly return to HMRC, with intermediary registration mandatory for businesses outside the EU and Northern Ireland starting April 1, 2026.
Registration and Responsibilities: Businesses can directly register for the IOSS if they meet specific criteria, such as being based in Northern Ireland or countries with mutual agreements with the EU. Once registered, they must charge appropriate VAT rates, include their unique IOSS VAT identification number on customs declarations, and keep detailed records for 10 years. Intermediaries will also play a crucial role, managing registrations and VAT reporting for clients.
Operational Guidelines and Compliance: The IOSS requires businesses and intermediaries to adhere to strict operational guidelines, including timely submission of monthly returns and payments, record-keeping requirements, and compliance with VAT obligations. Non-compliance can lead to registration cancellation and exclusion from the scheme, with a minimum two-year ban on re-registration. Important dates for registration and changes to the scheme are set for March 1, 2024, and April 1, 2026.

Detailed

1. Executive Summary

The VAT Import One Stop Shop (IOSS) scheme is designed to simplify the declaration and payment of VAT for businesses selling low-value goods (consignments of £135 or less) imported from outside the EU and Northern Ireland to consumers within the EU or Northern Ireland. Businesses registered for IOSS can declare and pay all eligible VAT through a single monthly return to HMRC. For businesses established outside the EU and Northern Ireland (including Great Britain), the use of an intermediary is mandatory. Intermediary registrations through HMRC will become available from 1 April 2026, introducing a structured framework for third-party representation, along with significant responsibilities and liabilities for intermediaries.

2. Introduction to the VAT Import One Stop Shop (IOSS) Scheme

The IOSS scheme facilitates the payment of VAT on imported low-value goods by allowing businesses to register in a single EU member state or with HMRC (for Northern Ireland businesses or those in agreed countries like Norway) and declare VAT for all eligible sales across the EU and Northern Ireland.

Purpose: “You can choose to register for the VAT IOSS scheme to report and pay VAT. You can do this if you sell goods imported in consignments with a value of £135 or less (known as low value goods) from countries outside the EU and Northern Ireland, to consumers in the EU, Northern Ireland, or both.” (Source: Check if you can register for the VAT IOSS scheme)

Scope of Eligible Goods & Sales:

Goods: Consignments with a value of £135 or less (excluding transport, insurance, and other taxes unless bundled). If multiple items are in a consignment, their individual values are aggregated.
Origin: Goods must be located in a country outside the EU and Northern Ireland at the point of sale.
Destination: Sold to a consumer in the EU or Northern Ireland.

Exclusions from IOSS:

Consignments containing excise goods (e.g., alcohol, tobacco).
Sales of low-value goods from outside the EU and Northern Ireland to consumers in Great Britain.
Sales to VAT-registered businesses.
Sales of goods located in Great Britain (England, Scotland, and Wales) to consumers in Northern Ireland are not reported on the IOSS return; they must be reported on the UK VAT return if registered. This includes sales from the Isle of Man to Northern Ireland.
Normal VAT rules apply for consignments valued over £135.

Online Marketplaces (OMPs): If goods are sold through an OMP, the OMP is responsible for reporting and paying VAT if the goods meet the IOSS criteria (outside EU/NI, £135 or less, to consumer in EU/NI). The OMP’s IOSS VAT identification number must be used on customs declarations.

3. Direct Registration for Businesses

Businesses that meet specific criteria can register directly for the IOSS scheme with HMRC.

Eligibility and Pre-requisites:

Businesses in Northern Ireland.
Businesses in countries with mutual assistance agreements with the EU (currently Norway).
Must be registered for UK VAT.
For Northern Ireland businesses, HMRC must be informed that the business is in Northern Ireland for VAT purposes.
Cannot be registered for IOSS in another EU country simultaneously. If already registered elsewhere, this must be cancelled before applying with HMRC.
Exclusion from an OSS or IOSS scheme for non-compliance results in a 2-year ban from registration.

Registration Process:

Requires a Government Gateway user ID and password used for UK VAT.
Information needed includes business details, any existing EU VAT/tax registrations, and bank details.
Registration begins on the day the business receives its unique 12-digit IOSS VAT identification number.

Post-Registration Responsibilities: Upon receiving the IOSS VAT identification number:

Charging VAT: “charge your customer VAT at the rate applying to the goods in the EU or UK at the point of sale.” (Source: Register for the VAT IOSS scheme)
Customs Declaration: The unique 12-digit IOSS VAT identification number must be included on customs declarations for each eligible consignment. This number must also be provided to any transport operators.
Record Keeping: Keep records of all eligible imports of low-value goods for 10 years.
Monthly Returns: “complete and submit a monthly IOSS VAT return including all sales of low value goods to consumers in the EU, Northern Ireland, or both.” (Source: Register for the VAT IOSS scheme) A nil return is required if no sales are made.
Monthly Payments: Make one monthly payment to HMRC for the total VAT due.
Updating Details: Keep registration details up to date and inform HMRC by the 10th day of the month following any change.

4. The Role of Intermediaries in IOSS

For certain businesses, an intermediary is essential for IOSS scheme participation.

Intermediary Registrations Available from 1 April 2026.

Purpose and Scope of Intermediaries: Intermediaries act on behalf of businesses (clients) to register them for the IOSS scheme, report, and pay VAT due to HMRC. “You can choose to register as an intermediary to act on behalf of your client for the VAT IOSS scheme. This will allow you to register your client and report and pay any VAT due to HMRC on their behalf.” (Source: VAT Import One Stop Shop scheme for an intermediary)

Businesses in countries outside the EU and Northern Ireland (including Great Britain) must use an intermediary to register with HMRC.
Northern Ireland or Norway businesses can choose to use an intermediary.
A client can only be represented by one intermediary (in NI or an EU country) at a time.

Intermediary Registration (from 1 April 2026):

Eligibility: Must be registered for UK VAT and have a business address in Northern Ireland.
Process: The intermediary must first register themselves for the scheme using their Government Gateway ID. They will receive a unique 12-digit IOSS intermediary number (starting with ‘IN’). This number is not a VAT number and cannot be used for declaring sales.
Exclusions: A 2-year ban applies if previously excluded for non-compliance. An intermediary can only have one IOSS intermediary registration.

Client Registration by Intermediaries:

After registering themselves, the intermediary registers each client. The intermediary must use their own Government Gateway ID, not the client’s.
Client Declaration: HMRC emails the intermediary a link to an online declaration form for the client. The client receives a 6-digit code from HMRC and uses their Government Gateway ID to access and agree to this form within 28 days. Failure to do so requires re-registration.
Upon client agreement, the client receives their unique 12-digit IOSS VAT identification number (starting with ‘IM’).

Intermediary Responsibilities:

Client Registration & Management: Register clients, and manage their IOSS registrations via the intermediary account.
Reporting: “complete and submit a monthly IOSS VAT return on their behalf” for each client, including nil returns if applicable. (Source: Completing an IOSS VAT return as an intermediary…)
Payment: “make one monthly payment to HMRC of the total VAT due on all their sales of low value goods.” (Source: Register to act as an intermediary for the VAT IOSS scheme) Payments require the client’s IOSS VAT ID as a reference.
Record Keeping: Ensure clients keep records for 10 years, and be able to provide these electronically to HMRC if requested.
Updating Details: Keep own and client’s registration details up to date, informing HMRC by the 10th day of the month following any change.
Due Diligence: Intermediaries are encouraged to perform due diligence on clients due to joint and several liability.

Client Responsibilities (when using an Intermediary):

Provide accurate business and contact details to the intermediary.
Agree to the online declaration form promptly, acknowledging “jointly and severally liable” status.
Charge the correct destination VAT rate.
Ensure their IOSS VAT identification number is included on customs declarations.
“keep records for of all eligible sales under the scheme” for 10 years and provide them to their intermediary electronically if asked. (Source: Using an intermediary to register and act on your behalf…)
Give the intermediary all necessary information for monthly returns and payments.
Inform the intermediary of any changes to registration details or a desire to cancel.

Joint and Several Liability: “You and your intermediary are ‘jointly and severally’ liable for any IOSS VAT debts from the date that you register and they begin representing you for the scheme.” (Source: Using an intermediary to register and act on your behalf…) This means HMRC can pursue either the client or the intermediary for outstanding IOSS VAT debts.

5. Key Operational Aspects

Consignment Value Calculation: The consignment value is the price the goods were sold for, excluding transport, insurance costs (unless bundled), and other taxes/charges. For multiple goods in a consignment, individual values are added.

VAT Rates and Currency:

VAT must be charged at the rate applicable in the EU country or UK where the consumer is located.
Returns must be completed in Pounds Sterling (GBP), using European Central Bank exchange rates from the last day of the relevant tax period.

Submission and Payment Deadlines:

Monthly returns and payments are due by “the last day of the month, following the end of each tax period.” (Source: Submit your IOSS VAT return) For example, January’s return and payment are due by the end of February. If the deadline falls on a weekend or bank holiday, payment must clear by the previous working day.

Record Keeping: Both businesses (directly registered) and clients (using an intermediary) must keep detailed records for 10 years, including:

Country of sale, goods description/quantity, date of supply.
Taxable amount, VAT rate applied, VAT amount due.
Payments received, invoice information, dispatch/transport details, proof of returned goods, order number.
These records must be available electronically; the One Stop Shop Standard Audit File (SAF-OSS) is recommended.

Correction of Errors:

Errors can be corrected on a return before submission.
After submission, errors must be corrected in a subsequent return (within 3 years of the original due date).
Over-declared VAT for Northern Ireland sales will be refunded by HMRC; for EU sales, the relevant EU country is responsible.

6. Cancellation, Changes, and Exclusions

Updating Registration Details:

Direct Businesses: Must notify HMRC by the 10th day of the month following any change.
Intermediaries/Clients: Intermediaries are responsible for keeping their own and their clients’ details up to date and informing HMRC by the 10th day of the month following any change. Clients must inform their intermediary.

Cancelling Registration:

Notice Period: “at least 15 days before the end of the month before you want to cancel your registration from the scheme.” (Source: Cancel or make changes to your VAT IOSS scheme registration)
Intermediaries: If an intermediary voluntarily cancels, “all your clients will be removed from the scheme” and will need to re-register directly or with a new intermediary. (Source: Cancel or make changes to your intermediary or client VAT IOSS scheme registration)
Moving to EU Registration: If a business or intermediary decides to register in an EU country, they must first cancel their HMRC IOSS registration.

Consequences of Cancellation:

HMRC confirms the cancellation date via letter.
A final return must be submitted, and any outstanding VAT paid.
Records must still be kept for 10 years.
Businesses must then follow normal VAT rules for sales to the UK, or the specific VAT rules of each EU country they sell to.

Re-registration: Businesses or intermediaries can re-register at any time if they meet the scheme’s conditions.

Exclusion from the Scheme:

Reasons:Failure to submit a nil return for 2 consecutive years (for both direct businesses and clients of intermediaries).
Missing payment or submission deadlines for 3 consecutive tax periods (for direct businesses, intermediaries, and their clients).
Non-compliance with scheme rules.
Consequences:Automatic cancellation of registration.
A minimum 2-year “quarantine period” during which the excluded party cannot re-register.
For intermediaries, exclusion for one client’s non-compliance affects all clients they represent (the intermediary and the non-compliant client are quarantined; other clients can find a new intermediary).
Potential penalties and interest.
Appeals: Parties can request a review or appeal to a tax tribunal if they disagree with an exclusion decision.

7. Important Dates

1 April 2026: Intermediary registrations for the VAT IOSS scheme become available.
1 March 2024: Direct registration for the VAT IOSS scheme became available.

8. Contact Information/Support

For specific questions regarding IOSS VAT return payments, the provided email is: [email protected]. General guidance and online services are accessible via GOV.UK and the HMRC business tax account.

Sources

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VAT Import One Stop Shop (IOSS) Scheme for UK Businesses and Intermediaries

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