From the beginning of next year, it will be possible for importers (or those who represent importers) to use a VAT and Duty deferral scheme in order to postpone their payments of VAT and Duty. The scheme also allows importers to pay the VAT/Duty of all consignments that had their payments postponed at once, rather than individually by the means of direct debit. You must pay the duties and Import VAT you defer during one calendar month (the accounting period) as a total sum, either on the 15th of the next month or on the next working day after it if the 15th is not a working day. This means that you can defer duties and Import VAT for between 2 and 6 weeks – an average of 30 days credit.
Continue reading to find out how you can apply for the scheme, and what you need to do prior to applying.
How Does The Account Work?
As mentioned above, essentially the account allows you to defer certain payments when importing goods until the 15th of the following month. You must then pay the deferred charges by direct debit and in the form of pounds sterling. You can defer:
- customs duties
- Import VAT
- Excise duty VAT
- excise duties (including Tobacco Products Duty)
- levies imposed under the Common Agricultural Policy of the EU
- Positive Monetary Compensatory Amounts under the Common Agricultural Policy
- anti-dumping or countervailing duties imposed by the EU
- interest charges on customs debts
However, the account is not without limits. You will have a deferral limit on your account, and should you reach it, you will not be able to defer anymore payments. Late payments are also liable to be charged interest. If you make persistent late payments, the HMRC can also revoke your account.
You can change the limit on your account, but you must contact the HMRC to do so.
Can You Use It?
The short answer is yes. Anyone who imports regularly into the UK will be eligible to apply for the scheme. The scheme will then allow you to defer the payments of customs duty, excise duty and import VAT.
You may need a financial guarantee in order to create an account. This guarantee is called a Customs Comprehensive Guarantee and you can apply for one here.
However, if you already have the previous version of the deferral account (and you plan to keep using it) the HMRC should contact to discuss changing the account to fall in line with new rules and you will get a guarantee waiver. If you have not yet been contact but feel as though you should have been, click here.
It is worth noting that you can also apply for a Simplified Import VAT Accounting account (SIVA) to help lower the guarantees required on your deferred payments. To get simplified accounting approval, your business needs to have a good system of control over its operations and flow of goods.
You’ll need to have records of your customs controls and a good history of VAT compliance over the last 3 years. You cannot apply if you owe money to the HMRC.
You will also need to have been registered for VAT for 3 years or more. You can still apply if you have been registered for less time, but you’ll go through more financial and credibility checks. Keep an eye on our social media as we will soon be releasing an article that focuses specifically on this topic.
These schemes could be vital for importers after Brexit, and thus it is well worth applying as soon as possible, as the deadline for Brexit is the 31st of December.
Here at J & P Accountants, we understand that the prospect of preparing your business for the application process and then contacting the HMRC 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. 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.
Daily News 30th November 2020
Logistics News: Government Approves Post-Brexit Lorry Site
Plans for a lorry site in Essex for customs checks after Brexit have been approved. It is hope that the airfield will be ready for use by 1st of January, the end of the Brexit transition period. However, the site will not be completed before the end of 2022.
It is clear that the government approved these plans in an attempt to reduce some of the congestion that ports are currently facing as businesses attempt to stockpile goods before Brexit. The site, which is being termed an ‘Inland Border Facility’, will hopefully make customs checks quicker and more efficient, with most vehicle checks taking a maximum of two hours.
Logistics News: Saloodo Expands Globally
Saloodo, the road freight platform set up by DHL in 2017, is now ready to be used globally. They have been expanding across Europe and now feel as though they are able to deliver all over the world. Their new improved platform will allow companies to order trucks in convoy and, eventually, transport service providers will receive transport requests via WhatsApp.
Now that Saloodo is a global platform, it has not only extended the range of functions, it also links the individual markets together. It’s now possible, for example, to arrange transports from the European Union to Turkey or to the Middle East & Africa and vice versa. This has made the platform much more attractive to prospective users.
VAT News: Germany Reprimanded For VAT Refunds
Germany have been in found by the EU commission to have been in breach of contract with their VAT returns for foreign taxpayers. Essentially, Germany had been automatically refusing applications that had missing information rather than asking for the missing information.
This is good news for anyone who is need of applying for a VAT refund from Germany. After the TADEUS meeting last week, it is likely we will see the EU commission attempt to streamline many EU countries’ VAT processes over the coming weeks.
Daily News 1st Decemeber 2020
Ecommerce News: Amazon Sales Surpass $4.8 bn Over Black Friday Weekend
Independent businesses selling on Amazon amassed over $4.8bn in worldwide sales from Black Friday to Cyber Monday, an increase of more than 60% from last year. Amazon has not yet published their own sales, but it is likely to be a significant increase on last year.
In its first indication of performance for the year’s peak online shopping days, Amazon said more than 71,000 small- and medium-sized businesses worldwide had surpassed $100,000 in sales this holiday season to date. This is likely to due to the extended length of Black Friday deals this year, as well as consumers opting for ecommerce over retail due to the effects of the pandemic.
E-commerce News: IZIVAT Offers Tax-Free Online Shopping
In response to the pandemic, French company IZIVAT have reinvented themselves and now allow international shoppers to purchase European goods from abroad, have it delivered, and also get the VAT refunded. Previously, they only allowed French shoppers to get their VAT refund back from shops in France.
This is a very interesting idea. IZIVAT allows customers to buy from French or European e-shops using IZIVAT’s invoicing name and address. IZIVAT collect the goods and take care of the international shipping. The VAT refund is sent where users like it most (Paypal, Wechat, or Bank transfer).
Business News: No-Deal Brexit Still Possible
Senior British ministers, including Michael Gove, have claimed that there is still a chance of a No-Deal Brexit. With the deadline 30 days away, it seems the two sides still haven’t reached an agreement on fishing, dispute resolution, and governance rules.
As the deadline of December 31st edges closer, businesses are getting more and more frustrated at the two sides seem reluctant to give up any ground on negotiations. Whilst it is likely that a deal will be reached, and a lot of the talk around a No-Deal Brexit is merely posturing, businesses would be wise to prepare for any outcome.
Daily News 2nd December 2020
E-commerce News: JD.com Among Bidders For CJ Group Logistics Business
Online Chinese retailer JD.com and delivery company SF Group are bidding for South Korean CJ Group’s China logistics business that is thought to be worth over $1bn. This news comes as e-commerce saw a sharp increase in popularity in China during the pandemic.
According to data from China Federations of Logistics and Purchasing, the total value of goods transported via the logistics sector rose 2% from last year in the first 9 months of 2020 to a staggering 202.5 trillion yuan. Businesses are clearly capitalizing on the country’s consumers shifting to ecommerce.
E-commerce News: Black Friday And Cyber Monday To Break All Records
Early reports are suggesting that this Black Friday and Cyber Monday may have been the most lucrative yet. These projections come as Amazon announced yesterday that the independent sellers on their platform enjoyed their best Black Friday to date.
In the US it is clear to see the effect that the pandemic has had on e-commerce. According to Adobe, Thanksgiving sales hit a record $5.1 billion, up 21.5% over 2019. Early data from Adobe Analytics forecasts Black Friday online sales to hit between $8.9 billion and $10.6 billion, which represents growth of 20% to 42% year over year.
Business News: China To Implement RCEP Quickly
It is being reported that China will quicken the implementation of trade liberalization measures promised under the Regional Comprehensive Economic Partnership (RCEP) deal. This will involve China accelerating efforts to open up goods, services and implementation methods to lower tariffs.
This latest news is certainly in line with pledges from the president to open up China’s economy as quickly as possible after the economy has recovered so well since the pandemic. The RCEP is the world’s largest trade deal and encapsulates fifteen countries.
Daily News 3rd December 2020
VAT News: Canada To Begin Taxing Digital Services
From July 2021, Canada will tax digital services from cross-border suppliers. As a result, non-resident businesses providing digital services to customers in Canada will have to start charging sales tax.
Up to now, only digital services businesses with local operations have had to charge customers sales tax, providing a potential advantage to non-resident businesses. The new measure aims to level the playing field for resident and non-resident providers of digital services.
E-commerce News: B2B Marketplace Launches In Europe
Three former Allegro executive have co-founded a B2B marketplace called MerXu and they have entered the market in Eastern and Central Europe. The platform mainly focuses on the trade of industrial goods, and has plans for further expansion over the coming months.
The company says it wants to facilitate trade between companies in the CEE region. To make this possible, it’s equipped with a communicator with the possibility of translating messages from potential partners into local languages.
VAT News: Germany Extends VAT Recovery Deadline To 31st December
In response to the obvious problems caused by the Coronavirus, The German Tax Administration has extended this year’s VAT recovery deadline for businesses from Non-EU member states to 31st of December. This is the deadline for VAT recovery from the year of 2019.
To benefit from the extension, businesses must give reasons as to why they were unable to meet the first deadline. Applications must also be submitted before the deadline with copies of the necessary original invoices. The extension will certainly come as a relief to businesses that have been affected by the pandemic.
Daily News 4th December 2020
VAT News: Singapore To Phase Out Paper Notices
The Inland Revenue Authority of Singapore (IRAS) has revealed that they will be phasing out paper GST notices and notices will be mostly digitalized by May 2021. They released the news in the GST Bulletin Issue 21 for December 2020.
The bulletin also notes the benefits of submitting GST returns to IRAS directly from accounting systems via APIs, as well as common mistakes to avoid, including input tax claims without valid documents and input tax claims for purchases not incurred for business purposes
Logistics News: ASEAN Customs Transit System Launched
The online ASEAN Customs Transit System (ACTS) was finally launched this week. The system has been designed to accelerate the trade of goods by road in South East Asia by making the deliveries more efficient and cost-effective.
The system allows businesses to lodge e-transit declarations directly to ASEAN customs authorities and track movement of their goods from loading to delivery. The system was developed with the help of the European Union, and had successful trials in Singapore, Thailand and Vietnam before being officially launched.
Business News: Brexit Deal In The Balance As Briefing Cancelled
A Brexit update from EU negotiator Michel Barnier for EU envoys was scheduled to take place today, but has now been cancelled due to the “intensive” nature of negotiations. This comes after Barnier claimed today to be a very “important” day in negotiations.
With the deadline on the horizon, there is likely to be a few more twists in the negotiations yet. This latest development is alarming, as it looks like fears of a No-Deal Brexit may not have been unfounded. Britain have until the 31st of December to bridge any gaps between themselves and the EU.
Due to the massive disruption suffered by all UK businesses through the months of March and June 2020 thanks to the pandemic, the government announced in March that they would defer the payments of VAT for these months, and instead would allow businesses to wait until March 2021 to pay their outstanding VAT. However, more recently the government have extended this period even further to March 2022 and are now allowing affected businesses to make use of the VAT Payment Deferral Scheme, which allows businesses who have opted-in to the scheme to make their payments in instalments over 11 months (beginning from March 2021). But how does this scheme work? Also, are you eligible to opt-in to use it? Continue reading to find out.
How Does The Scheme Work?
For those who are able to pay their VAT for the months of March to June 2020 in full on or before the 31st March 2021, the HMRC are advising they do so. Should you require longer to pay your VAT back though, the scheme essentially allows you to spread the cost of the outstanding VAT over 11 months. The instalments will be interest free, and you can choose how many months you want to pay it over (between 2 and 11 months).
The HMRC have pointed out that the following does not qualify for deferral: Payments of import VAT, Customs Duties or other taxes (such as Insurance Premium Tax, Machine Games Duty etc.) unless covered by another Government announcement; VAT due to be paid in relation to disclosures and assessments due to HMRC; and Time To Pay (TTP) arrangements for payments due before 20 March 2020.
How To Apply
To benefit from the scheme you must opt-in before March 31st 2021. It is worth knowing that you have to do this yourself, and cannot delegate the task to an agent. The application process will open in early 2021, so it is worth making sure you can meet all the criteria before then. According to the HMRC, to use the scheme you must:
- still have deferred VAT to pay
- be up to date with your VAT returns
- opt in before the end of March 2021
- pay the first instalment before the end of March 2021
- be able to pay the deferred VAT by Direct Debit
Should you fit the above criteria, there are a few things that the HMRC have communicated that you must do.
- Create your own government gateway account if you don’t already have one
- submit any outstanding VAT returns from the last 4 years. You will not be able to join the scheme if you have not done so
- correct errors on your VAT returns as soon as possible. Corrections received after 31st December 2020 may not show in your deferred VAT balance
- make sure you know how much you owe, including the amount you originally deferred and how much you may have already paid
The HMRC are also advising that you pay what you can as soon as possible to allow them to show the correct deferred VAT balance, and thus it’ll be easier for you to consider the number of equal instalments you’ll need (again, from 2 to 11 months).
This scheme will certainly help businesses who were negatively affected by the first lockdown. According to the Chancellor Rishi Sunak, nearly half a million businesses deferred over £30bn of VAT this year. If, even with the scheme, you are unable to pay your VAT, you must contact the HMRC and they have said they will help the best they can.
Here at J & P Accountants, we understand that the prospect of trying to comply with all those tax regulations can be daunting.
If you are a business who participates in cross border e-commerce, we would be more than happy to help you register for VAT, file your VAT returns, and help you comply with VAT in case your account faces any issues. 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 firstname.lastname@example.org.
There has been quite a lot of confusion surrounding the new VAT rules that will come into effect from January 1st 2021. This has mainly been due to the fact that Northern Ireland will have dual status, in the sense that the country will stay aligned with the EU VAT rules for goods, but will also remain as part of the UK’s VAT system. This of course gives it quite the unique position, since the UK is leaving the EU single market; but, the Northern Ireland Protocol must be followed. So how will this effect trade with Northern Ireland? This article will outline the changes that are coming, and also what you need to do to prepare for them.
The Northern Ireland ‘XI’ Number
Whilst is true that transactions between Northern Ireland and the UK must be treated as exports and imports, the HMRC is using existing flexibilities in order to class these transactions as regular UK VAT transactions; meaning that UK input and output VAT would be due. However, rather than using GB for invoices, you must now use XI.
This will be relevant for goods that are located in Northern Ireland at the point of sale, goods supplied by Northern Ireland by VAT registered EU businesses, or the sale or movement of goods from Northern Ireland to the EU.
There will be no need to apply for a new XI VAT number, businesses must simply substitute the GB from their invoices to XI so it is clear differentiated from normal UK transactions. It is also worth noting that goods moving in transit between Ireland and the EU via the UK – known as the UK Land Bridge – will have special arrangements to minimise the disruption of existing trade.
Differences Between B2B For Ireland And UK
When it comes to business to business goods movements, there is a difference between Northern Ireland to Ireland and Northern Ireland to the UK. When NI businesses trade with Ireland, these transactions will be classed as ‘movements across internal EU borders’- in other words, they will remain as intracommunity VAT zero-rated transactions.
However, in the case of B2B sales from Northern Ireland to the UK, these will be treated as exports and imports for VAT. Essentially, this means import taxes in the form of VAT and excise duties are due.
However, there is further complications as the UK VAT on Northern Ireland to GB VAT interpretation is in variation to this. It has chosen to treat GB to NI as a domestic transaction, in order to allow it to be flexible, and is prioritising the integrity of the UK’s VAT union. This means it is considering its sales VAT as simulating the effect of import VAT rather than as a domestic supply.
What About Business To Consumer?
If a good/service is moving from the UK to Northern Ireland, then UK VAT is due and should be charged by the vendor. What is worth noting though is if the goods are actually going to an Ireland address and moving through Northern Ireland, then they are classed as an import. As it stand, if they do not exceed 22 euros then they are exempt from VAT. However, just like the UK’s small concession limit, this will be abolished in July 2021.
Northern Ireland will have slightly different rules when it comes to online market places from the UK. Whereas from January 1st 2021 when goods are sold from overseas to UK consumers using a online market place the tax obligations are placed on the online marketplace, if an overseas seller sells NI goods to a NI consumer the obligations will NOT be transferred to the Online Marketplace – they will remain the responsibility of the online seller.
These rules will be very difficult to navigate as there is going to be only minor, but significant, differences between the way the EU will interact with Northern Ireland and the UK when it comes to tax.
But don’t worry, that’s where we come in.
Here at J & P Accountants, we understand that the prospect of trying to comply with all those tax regulations can be daunting.
If you are a business who participates in cross border e-commerce, we would be more than happy to help you register for VAT, file your VAT returns, and help you comply with VAT in case your account faces any issues. 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 the busy festive period, so please do not hesitate to give us a call on 0161 637 1080 or send an e-mail to email@example.com
Daily News 23rd November 2020
VAT News: Saudi Arabia To Review VAT Increase
In July, Saudi Arabia decided to triple their value-added tax from 5% to 15% in reaction to the economic crisis caused by the pandemic. However, the minister of commerce has announced that this policy will be reviewed once the economic crisis is over. The 5% tax was only introduced in 2018.
It has been a particularly tough year for Saudi Arabia. Since they are the world’s largest exporters of crude oil, the oil market turmoil, coupled with the pandemic, has meant that the government have had to introduce a range of new regulations such as increased VAT, increased custom fees and trimmed government aid programmes.
Business News: Britain And Canada Finalize Trade Deal
As Britain prepares to end its transition out of the European Union on Dec. 31, it has negotiated multiple rollover bilateral deals to maintain trade with Canada. Whilst many of these deals simply are an extension of agreements that were already in place, both parties have vowed to start talks on a bigger agreement next year.
With this announcement Britain and Canada have maintained their trade relations, which is a vital step for both countries’ respective foreign agenda. Undoubtedly Britain will use this deal in an attempt to form closer ties to the CPTPP agreement, and Canada will likely use the regulations in order to form a similar deal with the EU. Canada is Britain’s fifth biggest trade partner after the US, China, Mexico and Japan.
E-commerce News: Austria To Record Double Digit Growth For The First Time
For the first time ever, E-commerce is set to make up 11% of the total retail sales in Austria. Due to the Coronavirus, e-commerce in Austria has had to undergo a fundamental and structural change, as consumers leaned more on e-commerce due to the impact of the pandemic and retailers had to digitalize.
This news comes from the EHI Retail institute and Statista who analyze the top 250 best selling business-to-consumer online shops in Austria. The current stats show that the top 10 of online shops in Austria account for 49.7% of the top 250’s sales. Sites in the top 10 include Amazon and Zalando.
Daily News 24th November 2020
VAT News: Saudi Arabia VAT To Remain For Short Term
Whilst reports yesterday suggested that Saudi Arabia were going to review their VAT increase after the pandemic, their finance minister has come out to clarify that this change will not be reconsidered in the short term. The minister said that the decision had been “difficult” to increase the tax, but will remain in place for the foreseeable future.
For those involved in cross border transactions, it is worth knowing that services provided by Saudi-based companies to those based outside the kingdom are in principle subject to zero VAT. However, exceptions apply and the tax authority looks closely at taxpayers applying the zero rate of VAT. In case the zero rate does not apply, the non-resident company cannot get a refund for the VAT incurred as per the above.
E-commerce News: E-money License Given To JoomPay.
JoomPay, a social finance app, has obtained an electronic money license in Luxembourg. The application has been created by Joom, the Latvian online marketplace. The mobile app allows money transfers, even if only one party has the app, and the only information needed is a phone number or email address of the recipient.
The instant payments market is growing fast. In Europe, the volume is worth over 2.5 trillion euros and is predicted to grow to more than 15 trillion euros by 2025. And it’s West Europe that’s driving innovation and will account for 38%of the instant payment transaction value within five years.
E-commerce News: Alibaba Welcomes Chinese Regulation
China’s increasing oversight of internet platforms is both “timely and necessary”, Alibaba Group CEO Daniel Zhang told the World Internet Conference on Monday. Zhang said Chinese internet companies had moved to the forefront of the global industry with the help of government policies, but regulations need to evolve.
Alibaba’s e-commerce marketplaces and payment services are also expected to face greater oversight under the draft rules published on Nov. 10 by China’s market regulator, which said it wanted to prevent platforms from dominating the market or from adopting methods aimed at blocking fair competition. These regulations should help to increase the efficiency of Chinese e-commerce.
Daily News 25th November 2020
VAT News: Italy To Introduce E-invoicing To Cross-Border Trade
Italy is to extend its SdI e-invoicing regime to cross-border invoices, and will withdraw the requirement to complete an Esterometro return. This will apply from January 2022. From 2022, sales invoices issued to non-residents must be reported through SdI within 12 days of the invoice. Purchase invoices received from non-residents must be submitted by the 15 days of the following month.
For those involved in cross border transactions, expect to see this trend spread to other countries. E-invoicing is cheaper, faster, and more environmentally friendly, thus it is likely to become more and more common over the next couple of years.
E-commerce News: Parcel Platform Paack Raises €44 million
The Spanish start-up has accelerated its growth by raising 44 million Euros. This will allow the delivery company to expand its coverage across Europe, where it is already present in over 60 countries in a range of countries, including the UK, France and Portugal.
Paack are responsible for handling the packages for the ‘last mile’ for e-commerce companies such as El Corte Ingles and Amazon. Their main selling point is that they are able to deliver parcels for next day or even same day delivery. They currently have over 3,000 couriers.
Business News: PM Warns Britain Won’t Budge On Fishing
British Prime Minister Boris Johnson said on Wednesday the European Union needed to accept the reality that Britain must control access to its waters if the two were to make progress in Brexit talks on fisheries. These comments come as both sides claim they are optimistic for a deal, but are preparing for a No-Deal Brexit.
As the deadline of December 31st edges closer, it seems that the two sides still cannot agree on the access of British waters. There is still some way to go until an agreement is reached on the ‘level-playing field’ also. Whilst these issues may not be resolved before the deadline, it is likely that some sort of deal that includes plans for future discussions on these issues will be made.
Daily News 26th November 2020
VAT News: Isle Of Man VAT Returns Must Be Submitted Electronically From April 2021
VAT-registered businesses and individuals from the Isle of Man will be required to submit VAT returns online and make payments electronically from 1 April 2021. Customers who are not currently enrolled for VAT Online Services will automatically receive a letter with an activation code with their next VAT return.
Three-quarters of Value Added Tax (VAT) returns are currently submitted electronically using the Isle of Man Government’s Online Services. It will become mandatory to submit this way from 1 April 2021. This change will make interactions more efficient and environmentally friendly.
E-commerce News: Bevh Wants Retail And Logistics To Work On Sundays
The German E-Commerce and Distance Selling Trade Association (Bevh) wants a temporary lifting of the ban on Sunday work in retail and logistics. The association thinks that, especially with regards to the upcoming Christmas shopping period, this is necessary to stop the spread of the coronavirus.
Germany is currently in a ‘light’ lockdown, but it seems inevitable that restrictions will become more strict. If retail shops were able to open on Sundays, this would lift the load on ecommerce stores somewhat and also ensure that shopping was more spread out, lessening the possibility of coronavirus being passed around . Bevh are also asking from the use of Click & Collect to be greatly increased.
Logistics News: Rush To Stockpile Goods Causes Sharp Increase In Cost
According to industry sources, British businesses are hurrying to stockpile goods five weeks before post-Brexit customs checks come into force on Jan. 1, driving up the cost of cross-border deliveries and cutting capacity. Logistics companies are being overwhelmed by the demand for shipments and help navigating the new rules that will come into effect from the beginning of next year.
The increased demand has pushed prices up by around 20% in recent weeks and will likely rise further in December. Indeed, the cost of journeys between Poland and England, and France and England, have risen by more than 10%. The frantic activity is clearly due to British businesses attempting to prepare for Brexit.
Daily News 27th November 2020
VAT News: European Tax Administrations and the European Commission Hold Summit
TADEUS, the yearly summit held by the European Tax Administrations and the European Commission, was held yesterday. The meeting was focused on addressing the challenges presented by the pandemic, and establishing the priorities for dealing with these issues.
This year’s meeting particularly focused on tax compliance, on the need for administrative cooperation and improved coordination of the development of intra-European IT systems. Tax administrations have a prominent role to play, not only in delivering support and services during the COVID-19 crisis, but also in ensuring the resilience of Member State and EU budgets.
VAT News: Online Market Places To Settle VAT for Sellers In Poland
The Polish government is currently working on an ‘E-commerce Package’ which will constitute a major reform for the payment of VAT. The most significant change is the burden of settling VAT will now rest on the shoulders of online market places.
This is a change that we saw announced earlier in the week for Britain also. It seems countries are now placing more pressure on Online Marketplaces to be responsible for VAT. In the case of Poland, the obligations will even apply to social networking sites and auction portals.
VAT News: Vietnamese E-invoicing Delayed
The Vietnamese e-invoicing mandate has just been officially postponed from 1st November 2020 until 1st July 2022. Taxpayers will therefore remain in the transitional period, during which they are still allowed to use paper invoices and current invoicing rules.
The movement to e-invoicing is one we are seeing across the globe, and is likely to become the main way of submitting of invoices over the next couple of years. Not only is the current system less environmentally friendly, but it is also more fraud-prone, and creates a big burden for tax administrations.
After all the uncertainty and deadline extensions, Brexit finally looks like it will be concluded on December the 31st. This means that from January 2021, the transition period will officially be over and the trading relationship between the UK and the EU will change forever. Whilst we are still waiting to find out whether it will be a No-Deal Brexit or not, the government has already released information on the changes that are being made to the sale of overseas goods and sales made via online marketplaces. These changes will come into effect from January 2021. This article will outline exactly what changes are coming so you can prepare your cross-border trading business for Brexit.
The Border Operating Model, which was released in July, outlined major changes to the sale of overseas goods and sales through marketplaces. This was to ensure that non-UK businesses are treated in the same way as UK businesses, and also to improve the effectiveness of VAT collection and improve the customer experience.
The most recent announcement from the HRMC has added more clarity in the form of new regulations surrounding the treatment of the importation of goods not exceeding £135, as well as information on the sale of goods though online marketplaces.
Sales Made Without An Online Marketplace
For the sales that are made without the use of an online marketplace, the rules are relatively simple. From January 2021, when goods are being imported from outside the UK (in consignments not exceeding £135 in value) ‘import’ VAT will no longer be due, and instead ‘supply’ VAT will be required. In other words, VAT will switch from being collected at the point of importation to the point of sale instead.
In essence, goods sent from overseas and sold directly to UK consumers without marketplace involvement will be deemed to have been sold in the UK. The overseas seller will be required to register and account for the VAT to HMRC.
Before outlining the new regulations for online marketplaces, it is worth pointing out here that these rules do not yet apply to Northern Ireland as negotiations are ongoing, and also this £135 limit marks the end of the Low Value Consignment relief. Further, this £135 figure is in regards to the entire total value of the consignment that is being sold, not the individual items within (excluding transport and delivery fees).
Sales Made With An Online Marketplace
If an online marketplace is used to facilitate the sale, then it will be the responsibility of the online marketplace to collect and account for the VAT. As with transactions without the marketplace, the value of the goods for VAT purposes will be based on the price they are sold to the consumer, rather than any value calculated at the point of importation.
However, this only applies to transactions that are in the form of a business-to-consumer sale. In the case of business-to-business transactions where the goods are stored outside of the UK, the online marketplace will not need to charge and account for VAT if the customer gives them their VAT registration number, and they confirm it’s correct using the new online service that will be available from December 2020. The online marketplace can add a note to the invoice (for example, by writing ‘reverse charge: customer to account for VAT to HMRC’) then send it to the UK business customer. The business customer will then be responsible for accounting for any VAT due on their VAT Return using a ‘reverse charge’ procedure, and will be able to recover the VAT as input tax on the same VAT Return under normal VAT recovery rules.
However, if the goods are stored in the UK, then the liability will fall again on the online marketplace for VAT.
Clearly, the government has shifted a lot of the responsibility on the online marketplaces to determine who is responsible for the VAT. They will no need to know the location of the goods at the time of transactions, whether the transaction is over £135, and also whether the customer is VAT registered.
This means it is worth having all this information organised and at hand if you should be using an online market place for cross-border sales into the UK.
Here at J & P Accountants, we understand that the prospect of trying to comply with all those tax regulations 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 VAT, file your VAT returns, and help you comply with VAT in case your account faces any issues. 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 the busy festive period, so please do not hesitate to give us a call on 0161 637 1080 or send an e-mail to firstname.lastname@example.org.