Brexit will affect countless industries, but perhaps none more so than ecommerce. Previously, the UK’s member status in the EU ensured the free movement of goods between the UK and the rest of Europe. Unfortunately for ecommerce sellers in the UK and the EU, this is all about to change. Not only will there be the introduction of tariffs, there will also be the need in some cases for the selling company to register for VAT in the countries that they sell to. Read on to find out how your company will be affected, and what you need to do to prepare for Brexit, regardless of the outcome.
Who Accounts For And Pays The VAT?
Essentially, the answer to this question depends on who and where you are selling a product to. In the case of B2B distance sales, then the customer is usually responsible for paying the VAT on import. However, in the case of B2C, you would be expected to pay VAT in the place of sale.
You have two choices here though. You can opt to pay the import VAT and customs duty yourself (usually you would increase the price of your product to reflect this), or, whilst it is not common you do have the option to shift the burden on to the consumer, who would only be shown the price of delivery and then they would have to pay VAT to the courier.
Bear in mind that these rules are extremely complex so please feel free to contact as us here at J&P accountant so we can advise you directly on your specific situation.
Do You Have To Register For VAT In EU Countries And Have A Fiscal Representative?
The short answer is yes. Previously, there was a distance selling threshold for each EU member state and so you only had to worry about this as a UK seller if you exceeded a certain amount. This threshold will no longer apply once for UK sellers from the 1st of January 2021.
The one-stop-shop rules will come into place from July 2021 which will limit this need, but in the meantime sellers should think very carefully about which countries they want to sell to. Company’s such as Germany, have difficult VAT deferral systems which might make VAT compliance very difficult before July 2021.
In a lot of states you will also need to appoint a fiscal representative (19 out of the 27). This is essentially an agent or accountant in the state who will be responsible for handling your VAT payments. It is thus vital you check the rules and regulations for each state you will be supplying to.
In the case of foreign exporters selling into the UK, you too will have to register with the HMRC to pay import tax to the UK. The current low-consignment threshold of £15 is being abolished from January 1st 2021 so all importers will have to register with the HMRC.
Sales On An Online Marketplace
As stated earlier, from 1 January 2021 the UK’s low value consignments exemption for goods not exceeding £15 in value will be withdrawn. This will make all imports subject to import VAT (and potentially customs duties). At the same time, a small consignment import simplification process will be put into place and online marketplaces (OMPs) must start accounting for VAT on behalf of suppliers that use their platforms. A simplification will be available from 1 January 2021 for low value consignments where the total value of the goods (not the individual value of each item) does not exceed £135, excluding shipping costs and duty.
It is worth reiterating that EU suppliers must register with HM Revenue and Customs and charge VAT at UK rates at the point of sale and then account for the VAT using normal VAT return procedures. The goods will then not be delayed by the requirement for VAT to be charged by customs at the point of entry.
Amazon and Ebay will be changing their current rules on cross border fulfilment also. This means it would be very wise for sellers to split their inventories between the UK and the EU.
We Are Here To Help
Here at J & P Accountants, we understand that the prospect of preparing your business for Brexit can be daunting; but that’s where we come in.
If you are a business who participates in cross border e-commerce, we would be more than happy to help you register for the VAT deferral scheme, file your VAT returns, and help you comply with VAT in case your account faces any issues. We even offer warehouse storage across in the UK and Europe.
At J&P, helping your business is our passion, and we understand that companies across the UK are at risk now more than ever. We are here to support you through the Coronavirus crisis and Brexit, so please do not hesitate to give us a call on 0161 637 1080 or send an e-mail to email@example.com.