E-commerce and Brexit – taxes, rules, and regulations

What you’ll learn

  • What the new VAT rules for e-commerce sellers are
  • How to best prepare for the latest customs regulations
  • The health and safety impact
  • What to tell your customers

Brexit continues to have an enormous impact on UK businesses, especially for those involved in e-commerce.

For e-commerce sellers, it means more bureaucracy and more tax. In the good old days, the EU e-Commerce Directive meant businesses could operate across borders in the UK and EU. But since the divorce, this has come to an end, and online companies must comply with local laws specific to online commerce.

Import VAT for e-commerce sellers

Since January 2021, HMRC has changed the import VAT on e-commerce rules for sellers and marketplaces. Including making facilitating marketplaces liable for the VAT collections for its overseas sellers.

Therefore, the UK B2C e-commerce and marketplace reforms include (they only cover Great Britain, not Northern Ireland):

  • Removal of the duty/VAT free £15 VAT threshold (LVBI Low Value Bulked Imports)
  • Imported goods under £135 are subject to sales VAT rather than import VAT
  • If an online marketplace ‘facilitated’ an import sale not exceeding £135, it is responsible for charging and reporting VAT (BIRDS Bulk Imports Reduced Data Sets)

From July 2021, B2C sellers shipping their goods from a single country will no longer need to register for foreign VAT and complete multiple VAT filings in countries where they are selling. Instead, they can opt to simply complete and file a new OSS (One Stop Shop) filing alongside their regular domestic VAT return that will list all their pan-EU sales.

The seller then sends the VAT due to their home VAT authority, which then forwards the taxes to the appropriate countries.

What does this mean for you?

So, what does all this mean for your business?

Well, right now, if your annual sales to a specific EU Member State stay below the threshold of that Member State, you charge your local VAT rate to all your transactions. Then, as usual, you will file a VAT return in your home country at the end of the reporting period.
But, if your annual sales to that EU Member State breach its distance selling threshold, you must register for VAT in that country. That means you charge a VAT rate appropriate to the customer’s country. Then, at the end of the reporting period, you are must file a VAT return in that country.

However, things are about to change. From the 1st July 2021, a new e-commerce VAT scheme comes into play, meaning the distance selling threshold rules will no longer apply.

Instead, an EU-wide threshold of €10,000 will be introduced. So, below this threshold, B2C goods will be subject to the member state’s VAT rules from which they are dispatched. If it’s exceeded, the destination member state’s VAT rules apply.

Brexit was never going to be easy

Far from the easy ride, we all hoped for, Brexit is proving to a complex organism. Just when you think you’ve got it sussed, there’s another revelation. Understanding and keeping up with the changes is vital, as is working with a carrier that knows its Brexit onions.

Smart Directions knows its Brexit onions. Call the team now on 01442 507 240 for the bespoke logistics service your business needs.

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