Union OSS, Non-Union OSS & IOSS Tax Control: Codes 2205, 2206 & 2207

Businesses selling to consumers across the EU can register for simplified VAT schemes rather than registering for VAT in every individual member state — these three codes keep that VAT separate from ordinary UK VAT.

The codes, and what each one holds

Code 2205 — Union OSS Tax Control Account tracks VAT collected under the One Stop Shop scheme for cross-border EU sales of goods or services by a business established in the EU (or, for goods, dispatched from the EU).

Code 2206 — Non-Union OSS Tax Control Account tracks VAT collected under the OSS scheme by a business established outside the EU selling digital services to EU consumers.

Code 2207 — IOSS Tax Control Account tracks VAT collected under the Import One Stop Shop scheme, covering low-value goods imported into the EU and sold directly to consumers. All three are Current Liabilities codes and normally carry a credit balance.

Real-world examples across industries

EU-established or Northern Ireland retailer

A homeware business with a warehouse in the EU (or a qualifying Northern Ireland operation) sells directly to consumers in several EU member states. Rather than registering for VAT separately in each of those countries, it registers once for the Union OSS scheme, charges each customer the VAT due in their own country at checkout, and reports the total collected through one EU return. The VAT collected on those sales is credited to 2205 (Union OSS Tax Control Account), kept apart from code 2200 since none of it is UK VAT. Because eligibility depends on exactly where the business and its stock are established, this is worth confirming against current HMRC or EU guidance before relying on it.

UK digital services provider

A UK-based company selling online courses or software subscriptions to consumers across the EU is established outside the EU for these purposes, so it falls under the Non-Union OSS scheme rather than the Union version. Each EU consumer is charged VAT at the rate applying in their own country, and the total collected across all those countries is credited to 2206 (Non-Union OSS Tax Control Account) rather than to ordinary UK VAT, then declared through a single OSS return covering every EU sale for the period.

UK online retailer shipping low-value parcels

An online shop registered for IOSS sells a £40 item to a customer in Germany and charges German VAT at the point of sale, rather than leaving the parcel to be held at the border for the customer to pay import VAT and a handling fee before release — a common friction point for UK sellers shipping into the EU. The VAT element collected on that sale is credited to 2207 (IOSS Tax Control Account), separate from any UK VAT owed on domestic sales, and declared through a monthly IOSS return rather than a separate German VAT registration. IOSS only applies below a specified consignment value, so it's worth checking the current threshold rather than assuming every parcel qualifies.

Why this matters day to day

Mixing OSS or IOSS VAT into the ordinary Sales Tax Control Account (code 2200) would make the UK VAT return incorrect, since this EU VAT isn't declared to HMRC at all — it's reported through the separate scheme return. Keeping each scheme in its own code also makes it far easier to spot which markets are actually generating cross-border sales.