European E-commerce and custom duties impact of Brexit : recent regulatory changes
The UK's HMRC (Her Majesty's Revenue and Customs) has modified the import VAT on e-commerce rules for sellers and marketplaces from January 1st 2021. How to comply with the new specificities ? What will be the major changes in terms of taxation of traded goods ? This article will give you the keys to follow these evolutions and to adjust to the new rules.
This includes making facilitating marketplaces liable for the VAT collections for its overseas sellers.
This follows the United Kingdom leaving the European Union VAT regime after December 31st, 2020. Europe is planning the same ecommerce VAT package from July 1st, 2021.** 
Mike Bishop, CEO of Webinterpret
This article will help you to get ready for Brexit-related changes, challenges and opportunities. We recommend you, in order to get a personalized list of actions for your business, to use the official Brexit checker.
Starting on New Year’s Day 2021, any online businesses will need to comply with local laws specific to online commerce.
Being prepared now is the only way to avoid stock being blocked at customs, frustrated and unsatisfied customers, and potential fines from U.K. or EU tax authorities.
The following changes will occur for goods shipped from the EU to the U.K. between Jan 1, 2021 and June 30, 2021 :
- All imported goods are subject to VAT – ending the £15 VAT exemption thresholds, known as Low-Value Consignment Stock relief.
- Imported consignments of goods not exceeding £135 are subject to sales (supply) VAT instead of import VAT. This should be charged to the UK consumer by the UK or non-UK seller in the checkout at the point-of-sale. The seller must then report and pay the collected VAT through a regular UK VAT return. A simplified customs declaration will still be required. Goods above this value are subject to VAT and customs in the old way.
- If an online marketplace (OMP) as Amazon and eBay ‘facilitated’ an import sale not exceeding £135, it becomes responsible for charging and reporting VAT. For any OMP facilitated sale of any value made by non-UK sellers where the goods were already in the UK. The OMP is also responsible for the VAT obligations.
- Orders above￡135 will be subject to duties and import VAT.
- Brands need to file for and remit VAT to HM Revenue and Customs (HMRC) every quarter.
The following changes will take place for goods shipped from the U.K. to the EU between Jan 1, 2021 and June 30, 2021 :
- Merchants are not required to collect VAT on orders shipped from the U.K. to the EU, provided that the EU customer will be an importer.
- Buyers are charged with any applicable import VAT and duties on orders shipped from the U.K. to the EU.
- Customs documents are required with all orders being shipped to the EU.
How much do EU customers pay for goods from the UK ?
European customers will no longer need to add UK VAT on goods imported in the EU, coming from the UK. Local VAT will have to be paid instead. As a default, this will be the responsibility of the final customer, but, to avoid your customers being charged with extra VAT to obtain goods, an option exists to pay VAT on their behalf, and this can be arranged with the shipping company.
How much do UK customers pay for goods from the EU ?
For example, a £200 coat bought from a German website could be charged with 12% or £24 customs duty. VAT at a rate of 20% is then applied to the total of £224, giving a VAT bill of £44.80. Once the courier has added its £11.50 admin fee, the UK consumer must pay £80.30 to the courier on the doorstep before he will be able to receive the item, adding around 40% to the coat’s price.
How do direct sellers pay for VAT ?
At this moment, merchants in the EU only need to register for a VAT number in another country if their sales exceed a certain threshold (€100K for Germany, Luxembourg, and the Netherlands; €35K for all other EU states). That’s all about to change. As we said, from 2021, merchants selling across the English Channel will require additional VAT registrations.
Our advice
Your invoices to UK customers need to show that VAT is charged besides retail price. VAT is calculated on prices of the goods only – minus shipping and other fees. Therefore, you might want to reconsider offering free shipping.
VAT declaration
You submit a VAT return every 3 months online in your HRMC account. To log into your account you will need to register for a VAT number and EORI number.
Quick Q&A on the subject
Is it still possible to send packages to the UK without a VAT number ?
At the moment, yes. But neither the courier or the supplier can be responsible for issues that might occur at custom clearance or compliance inspection. So, you should apply for a VAT number as soon as possible to prepare your company for future changes.
Does my company have to pay VAT on goods that I want to export to Great Britain ?
Goods exported to Great Britain are generally exempt from VAT in the EU. However, you must be able to prove that the goods have left the EU. Member States generally base this proof on the exit certification given to the exporter by the customs office of export. You should check the UK government’s website for the VAT rules that apply to goods imported into Great Britain.
I am a consumer buying goods online from a UK-based website. What do I need to consider when it comes to VAT and customs duty ?
Since January 1st 2021, goods bought online for personal use from a business in the UK are subject to customs formalities in the EU, including the relevant VAT and duties. Until June 30st 2021, goods with a customs value of less than EUR 22 can, under certain conditions, be exempt from VAT when entering the EU. However, this will change from July 1st 2021, from which date VAT will be due on all imports, regardless of their value. Excise duty will be due on alcohol and tobacco from Great Britain, and must be paid before the goods would be released. Sometimes online businesses, postal operators and/or courier services take care of the administration related to the VAT and duties due on non-EU goods entering the EU. If not, you may be contacted by the postal operator or customs authorities in your Member State in order to settle the outstanding VAT or customs duties due on your parcel. Read the terms and conditions and delivery information carefully when buying online from the UK. For more information, you should contact your national authorities.
I am an EU business selling goods online to UK consumers. Do I have to pay VAT in the EU on these goods ?
If you are selling goods into the UK (Great Britain), the VAT will be due in the UK, according to the UK VAT rules and rates. You should check the UK government’s website for more information.
I am an EU business selling digital services to customers in the UK. Can I continue using the VAT Mini One Stop Shop (MOSS) system to take care of my VAT obligations with the UK ?
No. MOSS can not be used to report and pay VAT due in the UK. You will have to comply with the rules applicable in the UK, and may also have to register for VAT in the UK. Suppliers established in the UK must switch, and make use of, the ‘non-Union scheme’ in an EU Member State. To remain part of the scheme, UK suppliers who were registered in the UK’s ‘Union scheme’ and established in an EU Member State, should move their VAT MOSS registration to an EU Member State. For more information, see the guidance note on VAT in services.
Useful links :
Register for your VAT number: https://www.gov.uk/vat-registration/how-to-register
Apply for EORI number: https://www.gov.uk/eori
Sign in to HMRC here: https://www.gov.uk/send-vat-return#:~:text=Sign in to your HM,Making Tax Digital' for VAT .
There is a deadline and penalty may apply if you fail to oblige. So please read the full requirement carefully : https://www.gov.uk/vat-returns
References of this article :
https://ec.europa.eu/taxation_customs/sites/taxation/files/2021-brexit-top-50-faq.pdf
https://www.avalara.com/vatlive/en/vat-news/uk-post-brexit-vat-on-e-commerce-b2c-imports.html