TITLE: Finance Bill 2026-27 VAT Changes and EU E-Commerce Updates for Cross-Border Sellers
Finance Bill clauses put VAT changes into legislative text
The Bill sets out measures that could affect invoicing, imported services, Northern Ireland sales and VAT administration.
E-invoicing: The Bill gives HMRC powers to make regulations for mandatory e-invoicing and to act as the UK Peppol Authority. The planned start date remains 1 April 2029. VAT-registered businesses are expected to issue and receive e-invoices using the Peppol core framework. The announced scope excludes consumer sales and cross-border transactions. The Bill supplies enabling powers; detailed requirements will follow in regulations.
Overseas services: From 1 April 2027, the reverse charge for services bought from overseas will apply only when the UK customer is VAT-registered. If your UK customer is not registered, the overseas supplier will generally need to charge and account for UK VAT, potentially requiring UK VAT registration.
Northern Ireland distance sales: From 1 January 2027, the €10,000 threshold (currently stated as £8,818) for relevant EU-to-Northern Ireland distance sales will count only supplies from the supplier’s home territory. Goods dispatched from stock in another EU member state will no longer count towards that threshold. If you had already opted to treat the place of supply as the destination before that date, the equivalent option will carry over under the revised rules for two years from when you made the original choice. This detail matters if your stock is spread across several countries: review registrations and dispatch records before the change takes effect.
The Bill also repeals the Northern Ireland call-off stock simplification from 1 July 2028. Goods removed from call-off stock before then can continue to benefit until 30 June 2029.
Other provisions include VAT accounting rules for the Deposit Return Scheme, expected to start in autumn 2027: no VAT is due on the deposit when the drink is sold, but VAT is due on deposits that are not refunded. The scheme administrator, rather than individual producers or importers, accounts for that VAT. The Bill also provides for future regulations covering eligible unregistered bodies’ VAT126 refund claims and adds a duty to correct errors from 1 April 2028, alongside HMRC’s proposed Customer Correction Notice power.
There are other measures to note: the medical deputy VAT exemption is due to be removed from 1 May 2027, while the standard 20% VAT treatment of public and workplace EV charging is confirmed from 1 November 2026. The marketplace VAT extension planned for October 2027 is being implemented through regulations, not this Bill.
For businesses with cross border VAT responsibilities, the Northern Ireland changes show why stock location and transaction data need to line up. Keep your systems and compliance process ready for each effective date, rather than treating the Bill as a single change arriving all at once.
EU e-commerce: identifiers are live, and IOSS could cover higher-value goods
From 1 November 2026, customs declarations for relevant distance sales to EU buyers must include product identifiers. The European Commission explains the new requirement in its product identifier notice.
For each product, declarations require:
- M-PID: the seller’s or platform’s product reference.
- NS-PID: the manufacturer’s own model, part or style reference.
- S-PID: a standard identifier such as an EAN, UPC or ISBN, where one exists. If there is none, the declarant must use the applicable exemption code.
The identifiers often already exist in listings, invoices or packaging. Sellers and platforms should make sure that data reaches the customs declarant, such as the IOSS holder or customs representative.
A separate €2 Union handling fee per item also applies to qualifying distance sales released for free circulation. It is a customs handling fee, not VAT, and is separate from the temporary €3-per-item customs duty introduced for low-value consignments from 1 July 2026. The handling fee is paid by the customs debtor, so confirm with your logistics and marketplace partners who is responsible and how the charge will be handled.
The other major change is IOSS. On 9 November, EU Member States reached a general approach to removing the €150 threshold. The Commission says the proposed rules would extend IOSS and marketplace deemed-supplier rules to all distance sales of imported goods, except excise goods. They are expected to apply from 1 July 2028, when the EU Customs Data Hub is operational; formal adoption is still to come. This is political agreement, not enacted law. Read the Commission announcement.
For a UK seller shipping directly to EU consumers, a broader IOSS could eventually mean collecting VAT at checkout on higher-value goods too. Start checking whether your product, order and marketplace data can support that process. More comprehensive customs product-data requirements are expected from July 2028.
Tribunal watch: guidance, product classification and marketing costs
Three recent rulings offer practical lessons for finance teams. Deloitte’s weekly VAT news summarises the decisions.
Thomas Holdings Limited & Ors [2026] EWCA Civ 1369: The Court of Appeal allowed an appeal concerning HMRC’s refusal to apply an extra-statutory concession to under-declared amusement machine licence duty. It found HMRC’s reasoning flawed: relying on HMRC guidance without further checks was not, by itself, evidence of negligence. HMRC must reconsider the claim. The practical lesson is to keep the guidance and records you relied on; good-faith reliance can be relevant when an old error is reviewed.
Bottled Science Ltd [2026] UKUT 429 (TCC): The Upper Tribunal allowed an appeal concerning Skinade, a liquid collagen product. Applying the Court of Appeal’s Innovative Bites judgment, it said that where a product is a drink, the statutory wording “food includes drink” is conclusive unless an exception or absurdity applies. The case returns to a fresh tribunal to decide whether Skinade is a drink of a kind used for human consumption and whether a beverages exception applies. For supplement brands, the classification of liquid products as drinks can determine whether standard-rate VAT applies, so keep formulation, marketing and packaging evidence aligned with the VAT treatment you apply.