Following on from our last article, which outlined the new VAT obligations that have now been placed on Online Marketplaces, it seemed prudent to delve a bit deeper into the ways in which Brexit will affect Amazon sellers; especially those in the UK. The new regulations at customs, along with the aforementioned tax obligations Amazon now face, have meant that Amazon have changed how they require their sellers to conduct their business. This article will outline these changes and advise you on how to best adapt your business.
The last few articles on this blog have covered the background of this topic extensively, so I will keep this introduction brief; as of December 31st 2020 the UK left the European Union meaning that now, as far as the EU is concerned, the UK is a ‘third country’.
By leaving the EU, the UK has been able to implement its own laws. With regards to cross-border trade, this has meant the abolishment of the £15 low consignment relief and the new obligation for Online Marketplaces (OMPs) such as Amazon to collect VAT on cross-border transactions that have a value of up to £135.
What Have Amazon Done In Reaction?
The first big change that Amazon implemented was putting an end to Cross-Border Fulfilment. Now, Amazon are requiring their sellers to send their products to fulfilment centres in the UK and EU, depending on where they are being delivered to.
In addition, Amazon UK now adds 20% to the price of items sold by non-UK sellers and charges them with hefty import fee deposits. Whilst this is not necessarily bad news for UK sellers, it has meant a reshuffle in the search rankings which sellers should be aware of and may mean that sellers from abroad may focus more on domestic targets which may cause some UK sellers see a drop in cross-border sales.
What You Should Do
To begin with, sellers should have a UK and EU EORI number; whilst this is mentioned in almost all of our Brexit articles, it is worth mentioning because it is vital to making sure customs checks and VAT compliance goes as smoothly as possible and will also allow you to store goods both in the UK and the EU. Whilst Amazon will be responsible for accounting for a lot of your VAT, you will still need to provide them with the relevant information.
Secondly, keep in mind the VAT threshold and try to keep consignments below £135. If you don’t you will be responsible for accounting for the VAT and you will also have to pay custom import VAT as well as sales tax (£135 is also the threshold for import tax). Ways you could do this include through bundle discounts, or by dividing packages into two; for example, if you are sending two items to one location, consider sending them in two different packages to ensure neither package goes over the £135 threshold..
Another thing worth considering is brand registration. Previously, brands doing business in the UK and the EU needed only an EU registration. However, post 1 Jan 2021, these brands will no longer be able to report potential infringements in the Amazon UK store and hence the brands will need to register both their UK and EU trademark in Brand Registry.
Finally, whilst it is not always for smaller Amazon sellers, it is certainly worth considering maintaining an inventory in both the UK and the EU. This will allow you to skip a lot of the customs procedures and will greatly reduce the risk of delays or a loss of sales.
Hopefully this advice has been helpful. At J&P we specialise in helping cross-border traders comply with VAT obligations and we are vastly experienced at working with Amazon traders. Should you need to register for UK or EU VAT or trademarks, or need any help with customs procedures we would be more than happy to help you.
Contacts us today at email@example.com, or give us a call on 0161 637 1080.