VAT System in the UK and the Commercial Impact of Sales from Turkiye
The VAT system (Value Added Tax) is a very important issue for Turkish e-commerce companies looking to expand into the UK market. The standard VAT rate in the UK is 20% and this rate directly affects both your pricing strategy and profitability. Especially for product sales from Turkiye to the UK, both the export process and tax obligations should be carefully planned. In this article, Export Partners provides basic information about the VAT system in the UK and discusses the commercial aspects of sales from Turkiye in detail.
1. Customs and Taxation Process in Exports to the UK
When you send a product from Turkiye to the UK, some cost items arise when the product reaches UK customs. The most notable among these are Import VAT and Customs Duty.
What is Import VAT?
The VAT payable at UK customs is calculated not only on the value of the goods, but also on the freight (transportation), insurance and customs duty, if any.
Import VAT Calculation Formula:
Import VAT = 20% × [Product Price + Freight + Insurance + Customs Duty]
Sample Calculation:
- Product Cost: £1,000
- Freight: £200
- Insurance: £50
- Customs Duty £30
- Total VAT Base: £1,280
- Import VAT: £256
This VAT is usually paid by the receiving company in the UK or by the customs agent acting on your behalf.
Customs Duty Rates
The customs duty rate in the UK varies according to the type of product. For example, there are rates up to 12% for textile products, while this rate may be 0% for some electronic goods. These rates are determined according to the GTIP (Customs Tariff Statistics Position ) code of the product.
Total Cost Formula:
Total Cost = Product Cost + Shipping + Transportation + Insurance + Customs Duty + Import VAT
All of these items should be taken into account when pricing, and your sales price should be adjusted to cover these costs.
2. VAT Registration and After Sales Process in the UK
An important point you should know about the VAT system when selling products in the UK; VAT registration varies according to the method of sale and the location of your company.
When is VAT Registration Mandatory?
- If you set up a company in the UK and store your products there and sell them to the domestic market, VAT registration is not compulsory up to a threshold of GBP 90,000 in annual sales.
- However, if you are not resident in the UK (i.e. your company is based in Turkiye), this threshold does not apply to you. Therefore, you need to register for VAT from the first sale.
What to do after VAT Registration
- 20% VAT is added to your product price.
- VAT returns are filed with HMRC every quarter.
- VAT collected and VAT paid are offset.
Sample Scenario:
- Selling price of the product: 100 GBP + 20% VAT = 120 GBP
- VAT charged: 20 GBP
- VAT paid in the same period: GBP 5
- Net VAT payable to HMRC: GBP 15
If these processes are not carried out correctly, you may face criminal sanctions and your trade process may be interrupted.
3. How to Calculate Profitability in Selling to the UK?
When selling products to the UK market, you need to analyze all cost items in detail to determine your gross profit rate.
The main costs to consider:
- Product Cost (ex Turkiye)
- Transportation and Insurance
- UK Customs Duties and Import VAT
- Warehousing / Fulfillment Costs (e.g. Amazon FBA)
- Marketing Expenses (Amazon commission, advertising budget, influencer collaborations, etc.)
- UK VAT Obligations (VAT)
Example Simple Profit Calculation:
- Turkiye release price: GBP 30
- Shipping + customs cost: 10 GBP
- Amazon commission 15 GBP
- Selling price (including VAT): 120 GBP
- Sales revenue excluding VAT: 100 GBP
- Gross profit 100 - (30+10+15) = 45 GBP
- VAT payable: 20 GBP
In order for your net profit to be realistic and sustainable, you should make these calculations separately for each product group, taking into account the fluctuations in exchange rates and the competition in the UK market.
Briefly about the VAT system
For Turkish companies considering exporting to the UK, the VAT system is not only a legal obligation but also a strategic cost element. Taken together with customs duties, import VAT, fulfillment processes and marketing expenses, a detailed cost planning is inevitable for a successful UK sales operation.
If you are planning to sell on platforms such as Amazon UK, Etsy or Shopify, having a good understanding of these processes will put you ahead of your competitors and ensure profitable growth in the long run.
Contact Export partners now to purchase services about all these complicated processes! Choose the right export packageand enjoy rapid growth in the E-commerce sector!
