How to crack the UK code: Shipping to the UK from India

Article by Holly Piggott , director at Alinea London

Read the full article here: https://www.tradefinanceglobal.com/posts/how-crack-uk-code-shipping-uk-india/

The Comprehensive Economic and Trade Agreement between the UK and India, signed on 24 July, has platformed significant bilateral trade opportunities between the world’s fifth- and sixth-largest economies. The UK government predicts that the agreement, set to go into force in mid-2026, will increase trade between the two nations by £25.5 billion each year. The Agreement presents an excellent opportunity for businesses that aren’t already doing so to start exporting to the UK from India. While exporting abroad can seem daunting, trade with the UK brings many benefits and unprecedented opportunities for expansion for Indian businesses.

UK Market Entry Models for Exporters

There are various market entry models that companies usually consider, including drop shipping from India, distributing locally without a UK entity, or establishing a UK limited company. Companies need to decide whether it is preferable to sell via their own website, where the organisation can retain full control over their customers’ data and experience, or via an online marketplace, which standardises listings and charges a commission on sales, or instead adopt a hybrid approach.

Drop shipping from India

Drop shipping from India is suitable for e-commerce and low value, low weight sales. The Universal Postal Service (UPS) has a simplified set of rules for postal and fast parcel clearance which are different to submitting a commercial customs entry into free circulation. HMRC’s customs declaration service (CDS) platform requires the agent to complete around 75 data entry fields related to the cargo per import, and the UK’s regulatory framework differentiates between postal and commercial cargo accordingly. 

E-Commerce Vendors 

E-commerce sellers who retail goods with a customs value below £135 must register for GB value-added tax (VAT), account for VAT at the point of sale, and disburse this to the UK government. On this basis, they will charge the UK client supply VAT rather than import VAT. This makes the process of shipping goods simpler, as up to this valuation threshold, there is no liability for customs duty which means the customer will not have to pay import VAT at the border. 

For mail-order goods with a value above £135, import VAT at 20% and customs duty will become chargeable once the goods enter the UK market. Check the UK Trade Tariff to determine the applicable duty rate. It is important to be aware that postal clearance operators may not apply preferential tariffs, whereas a commercial broker will be able to apply a reduced or zero duty rate if supporting documentation is provided.

Shipping fast-parcels via e-commerce sales and use of the Bulk Import Reduced Data Set (BIRDS)

The bulk import reduced data set (BIRDS) is a customs procedure that can be used to declare multiple low-value consignments (below £135 per importer) on one customs declaration. This process simplifies customs for traders shipping a high volume of low-value goods. It may only be used by a declarant authorised to use it. To use it, the agent must submit details of the companies that they represent that use the procedure to HMRC in order to obtain authorisation.  

Local distribution without a UK entity

Storing locally without a registered UK entity is a model frequently adopted by traders who sell specific types of goods via e-commerce platforms. It is not uncommon for companies that have a competent e-commerce strategy to make significant revenue through online platforms without branching into physical retail, whilst managing their operations from outside of the UK. This model relies on:

• A reliable fulfilment centre partner that can conduct third-party logistics (3PL) and fulfilment on behalf of the company and manage online sales returns. Depending on the sector, 20 – 25% of fast-moving consumer goods (FMCG), fashion, and retail sales are returned in the UK. 
• Currently Amazon acts as a “marketplace facilitator” and will collect VAT on behalf of the UK government for goods with a value below £135, goods of any value sold by overseas sellers stored in the UK, and certain cross-border EU sales. 
• Overseas sellers selling from the UK marketplace have an immediate obligation to register for GB VAT. However, if they only sell through an online marketplace (OMP) to consumers (different rules apply for B2B sellers) then they will be considered to have made a zero-rated ‘deemed supply’ to the OMP, and the OMP will account for VAT on sales.
• Registration for VAT as a foreign entity enables access to postponed accounting for import VAT, so that 20% import VAT does not have to be paid when the goods arrive in the UK and can instead be simultaneously declared and reclaimed on a VAT return, which means there is effectively zero import VAT to pay. Ultimately, VAT registration is likely to result in a reduction of 20% of the landed cost of the goods.
• VAT registered sellers must charge supply VAT to customers, and file timely quarterly or annual VAT returns. Sellers must pay the supply VAT to HMRC. 
• If the company is not considered to be established in the UK, the customs agent can only be appointed as an indirect representative. On this basis, the customs agent will share fiscal responsibility with the company for any customs debt and will therefore supervise customs valuation and rules of origin compliance. 

Overseas sellers are considered to be established in the country where the ‘principal place of business’ is located. This is where the essential management and day-to-day running of the business takes place. It should not be a UK fulfilment centre or third-party address, such as mailing forwarding or registered office address.

If the company has a dependent agent with a permanent establishment based in the UK acting in the name of the company to conduct sales, then the company should register to pay corporation tax. If the company has a physical presence in the UKthey must also register with Companies House.

Selling via local entity in the UK

Overseas companies sometimes register a company in the UK to improve their branding, visibility, and customer perception in the UK market. This may also help with opening a UK bank account, registering for UK accreditation, and using certain government portals. 

• Established UK companies must register for GB VAT once their turnover reaches £90,000.
• If a firm’s actual place of management is external to the United Kingdom, this must be reported to HMRC and any other relevant government authorities. 
• For HMRC purposes for tax and customs, the company will still be subject to indirect representation if the place of management is not the UK or if there isn’t an actual physical presence in the UK, which entails office premises and staff.
• UK limited companies must submit corporation tax filings for their annual accounting period and pay tax on profits at the national rate. 
• A small profit rate of 19% applies to single companies with augmented profits of less than £50,000. The main rate of 25% applies to companies with profits above £250,000. For companies with profits between these two tiers, the main rate will apply, discounted by a marginal relief. The marginal relief calculator can be used to calculate the rate of corporation tax for companies with profits below £250,000.

UK Customs Valuation

Valuation method 1 is used based upon a commercial invoice. In circumstances where no sale has occurred – for example a transfer of inventory occurs when goods owned by the overseas seller in India are sent to a distribution hub in the UK, the valuation methodology 2-6 must be applied on a consecutive basis (4 and 5 are interchangeable)  to determine the customs valuation of the goods. 

• Valuation method 1 – invoice value of an actual sale between unrelated parties.
• Valuation method 2 – value of identical goods imported at around the same time of the import. Evidence of the valuation (identical goods invoice and customs declaration) must be provided. 
• Valuation method 3 – value of similar goods imported at around the same time of the import. Evidence of the valuation (similar goods invoice and customs declaration) must be provided. 
• Valuation method 4 – deducted valuation based upon value of the goods on the UK marketplace, discounted by import tax, freight and commission. A deduction for profits and general expenses of around 10% may be permitted if this is in accordance with industry norms. HMRC permits the lowest value of a wholesale or bulk sale to be declared where there is evidence of recent UK sales at this value. 
• Valuation method 5 – computed (built-up) valuation method. This method is based upon the cost of the production of the goods and can be used where the seller is also the manufacturer of the goods. Evidence of the cost or value of materials and fabrication or other processing used in producing the imported goods, design work supplied directly or indirectly, containers and packaging, an amount for profit and general expenses, and costs of transport, handling and insurance to the UK border.
• Valuation method 6 – this method is the fall-back method and can be used only where a direct fit with method 2 – 6 is not possible. It involves a reasonable adjustment to be made to method 2 – 6, to accommodate the circumstances. 

UK Trading Standards

The UK operates stringent product safety standards through legislation, including the Consumer Trading Standards Regulations 2017 and the General Product Safety Regulations 2005 (GPSR). Prior to selling into the UK, it is advisable to contact the Trading Standards Office or Port Health at the port of entry and identify the compliance needed for your product to enter the UK marketplace. Companies may also work with a product compliance expert specialising in their sector.

Companies should also consider their responsibilities when selling to private individuals in accordance with The Consumer Rights Act 2015; legal protection for UK consumers, for example, includes a 14-day right to return unused items. 

Opportunities for Indian Exporters

The India-UK free trade agreement is anticipated to enter into force in 2026. The result is reduced tariffs, reported to be zero-rated on nearly 99% of product categories of Indian economic origin, opening significant opportunities for Indian companies to capture their share of the UK’s marketplace. 

UK retail sales are reported to reach £599.07 billion in 2025, with online sales accounting for 30.7% or about  £184 billion. India has the highest growth rate of any  G20 economy, and increased trade between India and the UK will enable both countries to expand even faster. Companies should use the next year to refine their UK entry strategy, come to terms with UK customs, market, and tax regulations, and prepare to seize this tremendous opportunity.