Entity Setup
Entity Setup and Compliance: Preparing Imports & VAT for Low Value Goods
UK reforms are accelerating duty relief changes on low-value imports and expanding VAT compliance for online marketplaces — what businesses importing goods or selling online must do now.
By NomadicTax Research Team • 5-8 min read • June 25, 2026
“The law has changed — effective by **October 2028**, low-value imports (goods valued at £135 or less) will lose customs duty relief,” says HMRC. This means importers and online sellers must prepare now.
Here are steps to ensure your entity structures and compliance systems are ready for the upcoming reforms. iscovery into how VAT is collected for online marketplace sellers is also under way as rules tighten. ([gov.uk](https://www.gov.uk/government/news/government-backs-high-street-with-acceleration-of-cheap-import-reforms-and-crackdown-on-dodgy-online-sellers?utm_source=openai))
## What’s Changing for Low Value Imports (LVIs)
- Currently, imports into the UK with a value of **£135 or less** are exempt from customs duty relief under the LVI schemes.([gov.uk](https://www.gov.uk/government/consultations/reforming-the-customs-treatment-of-low-value-imports-into-the-united-kingdom?utm_source=openai))
- The government will **scrap this relief** fully by **October 2028**, bringing these goods into the customs duty net. That means duty must be paid, even on cheaper imported items.([gov.uk](https://www.gov.uk/government/news/government-backs-high-street-with-acceleration-of-cheap-import-reforms-and-crackdown-on-dodgy-online-sellers?utm_source=openai))
- Sellers and online marketplaces will be required to pay customs duty to HMRC, likely with quarterly payments after goods enter the UK.([assets.publishing.service.gov.uk](https://assets.publishing.service.gov.uk/media/692576c7aca6213a492dcfda/FINAL_-_Reforming_the_customs_treatment_of_low_value_imports_into_the_United_Kingdom.pdf?utm_source=openai))
## Who’s Most Affected & Why It Matters
- **Small import-oriented businesses**, especially online sellers bringing in goods under £135.
- **Marketplace platforms** facilitating such sales are coming under scrutiny to ensure VAT and duty are collected.
- **Consumers** may face higher prices if costs are passed on.
For entities with cross-border trade, this change shifts risk and compliance burden — meaning businesses need to reassess supply chains and customs strategy.
## Action Plan for Entities & Sellers
| Step | What to Do | Timeline |
|---|---|---|
| Audit your current imports under £135 | Quantify volume, value, current reliefs claimed, online marketplace involvement | Within next 6-12 months |
| Update Pricing Models | Build in duty & VAT costs that may arise; consider whether absorbing cost or passing it through | Before October 2028 implementation; test with financial projections |
| Revise contracts & contracts with suppliers / online platforms | Ensure duty/VAT collection and declaration responsibilities are clear; consider who pays, seller vs marketplace vs consumer | Now, with legal review |
| Strengthen systems for customs declarations & duty payment | Set up processes for reporting, paying duties; consider software to assist compliance | Phase in over the next 12-24 months |
## Entity Setup Considerations
- Entities importing goods (whether direct or via marketplace) should evaluate whether to set up local UK subsidiaries or use UK-based fulfillment to take advantage of efficiencies in customs clearance.
- Online marketplaces may be classified as responsible for collecting & remitting duty / VAT in some cases — contracts with marketplaces need clarity.
- Import classification systems (tariff codes) will matter more; mistakes will lead to penalties or unexpected charges.
## Example Scenarios
- **Scenario A**: A small Etsy seller shipping products from abroad under £135 per order — in future they must either include duty cost or arrange for marketplace to handle it.
- **Scenario B**: A fast-fashion brand using UK fulfillment centre — they import low value stock, distribute via marketplace; may see duty for many goods previously duty-free.
- **Scenario C**: A marketplace operator may need to update its platform to collect duty upon sale or instruct sellers on responsibilities.
## Compliance Tips & Pitfalls
- Always monitor government consultations on design of LVI reforms — surveys, stakeholder feedback may influence details.([gov.uk](https://www.gov.uk/government/consultations/reforming-the-customs-treatment-of-low-value-imports-into-the-united-kingdom?utm_source=openai))
- Keep detailed records of import values, dates of sale, marketplace arrangements.
- Watch out for overlaps: VAT and customs duty rules both apply; misapplication of either can lead to interest, penalties.
- Seek customs advice for tariff classification, since even under £135 some goods may be excluded.
Preparing early will help your entity avoid surprises, comply on time, and maintain competitiveness when these reforms take effect. With global trade ever more digital, building robust customs and VAT compliance will be a differentiator.