Shopify VAT UK: What Overseas Ecommerce Sellers Need to Know

If you’re an overseas seller—looking to sell in the UK through Shopify, it’s crucial to understand your VAT obligations. Unlike marketplaces such as Amazon or eBay, Shopify doesn’t collect VAT for you, which means the responsibility lies fully with the seller.

You’ll need to register for UK VAT if your sales meet HMRC’s requirements, even if you don’t have a UK presence. This includes charging the correct VAT rate at checkout, issuing compliant invoices, and submitting VAT returns.

This guide provides a clear overview of the key VAT rules that apply to Shopify sellers, helping you stay compliant while confidently growing your e-commerce business in the UK market.

Shopify Seller Responsibilities vs Marketplace VAT Collection

Shopify is an e-commerce platform, not a marketplace facilitator. Unlike Amazon or eBay, Shopify does not automatically collect UK VAT on your product sales.

As an overseas ecommerce seller using Shopify to sell into the UK, you are fully responsible for UK VAT compliance on those sales. This means you must register for UK VAT (threshold £0) and charge VAT where required.

VAT Registration Requirements for Shopify Merchants Selling into the UK

As with any overseas sale into the UK, the moment you make taxable supplies to UK customers (beyond some exceptions), you must register for UK VAT. There is no distance-selling threshold for goods from non-UK sellers; selling even one shipment can trigger a registration requirement.

Once registered, you must include your UK VAT number on invoices and inform Shopify of your registration.

How to Charge VAT on Shopify Sales: A Seller’s Guide

If your goods are shipped to UK buyers from abroad:

Consignment value ≤ £135
You must charge 20% UK VAT at the point of sale when sold to customer or unregistered business. (Brexit rules mirror marketplace rules here: although Shopify doesn’t auto-collect, UK law says you must apply VAT.) To comply, you should configure Shopify’s tax settings to add VAT to UK orders. If you don’t, HMRC may expect you to account for VAT anyway.
Consignment value > £135
For consignments valued over £135, “normal import rules” apply. This means you do not charge VAT at checkout; instead, import VAT and any customs duties are handled on arrival in the UK (often paid by the carrier or the customer).

Shopify’s duties/import-tax feature reflects this: above £135 it applies import VAT and duties instead of UK VAT. (If you want to cover import VAT yourself, you could offer DDP shipping, so customers see all costs at checkout.)

Goods stored in UK (e.g. using a UK fulfillment center)
If you hold inventory in the UK (for example, using a UK fulfilment centre or Amazon FBA UK), you are treated as a UK business for those goods. In this case you must register for UK VAT and charge VAT on sales of those goods. In other words, any stock physically in the UK triggers registration.

Handling Shopify Platform Fees and VAT Implications

UK-based Shopify merchants incur various fees that may be subject to VAT, including subscription fees for using the platform, transaction fees when using third-party payment providers, shipping service fees, and purchases made through the Shopify App or Theme Store. Whether or not VAT is applied to these fees depends on the VAT registration status of the merchant.

For merchants who are not VAT-registered, Shopify typically charges VAT on its fees, which is reflected on their invoices. Since these businesses are not registered for VAT, they cannot reclaim the VAT paid, making it a direct cost to their operations.

For merchants who are UK VAT-registered, Shopify does not charge VAT on its fees. Instead, the reverse charge mechanism applies because Shopify provides its services from Ireland. Under this system, the responsibility for accounting for VAT shifts from Shopify to the merchant. The merchant must report both the output VAT (as if it had been charged by Shopify) and the corresponding input VAT (as if they had paid it) on their VAT return. This results in no net VAT liability but ensures the transaction is correctly reported for VAT purposes.

Invoicing and Record-Keeping Best Practices for Shopify Stores

Use Shopify’s built-in features or third-party accounting tools to issue VAT-compliant invoices that clearly show VAT rates and amounts. HMRC requires that you retain digital records of all transactions, including sales, expenses, VAT collected, and import VAT paid. If you import goods into the UK, you should use postponed VAT accounting and reclaim the import VAT in your returns. Ensure that Shopify-generated reports or connected software (like Xero or QuickBooks) capture all the necessary VAT details to stay compliant.

Making Tax Digital (MTD) Compliance for Shopify Sellers

Under HMRC’s Making Tax Digital (MTD) initiative, VAT-registered Shopify sellers must digitize their records and submit VAT returns via compatible software. Here’s how to align your Shopify store with MTD requirements:

Connect to MTD-compatible accounting software
Shopify can export order data to CSV files, but it's best to use MTD-approved software like Xero, QuickBooks, or a dedicated VAT filing tool. These platforms help automate return filing and reduce manual error.

Track VAT accurately across all sources
Maintain clear records of VAT on sales, purchases, Shopify fees, and import VAT. Use automation tools or apps in the Shopify App Store to sync data between your store and your accounting system.

Stay on top of submission deadlines
VAT returns are usually submitted quarterly. Ensure all digital records are updated in real time to avoid last-minute discrepancies or HMRC penalties.

Final Thoughts: Navigating UK VAT as a Shopify Seller

Selling into the UK through Shopify opens a valuable e-commerce market, but it comes with complex VAT obligations. As an overseas seller, the responsibility is on you—not Shopify—to ensure full VAT compliance. From registering for VAT and configuring your store correctly, to issuing compliant invoices and filing digital returns under MTD, each step requires attention and accuracy.

By understanding the specific VAT rules for Shopify sellers—and setting up your tax settings, invoicing, and software integrations accordingly—you can avoid costly penalties and build a compliant, scalable UK operation. Shopify gives you the tools, but it’s up to you to apply the tax rules correctly. Consider working with a UK tax advisor to keep your compliance solid as your business grows.