2021 Brexit & Ecommerce News for U.S. Companies Selling to UK
As of January 1, 2021 the EU-UK Brexit Withdrawal Agreement is now in effect. The UK consists of England, Scotland, Wales and Northern Ireland, however, for customs purposes Northern Ireland will continue to follow EU customs rules. UK tax authorities, HMRC (Her Majesty's Revenue and Customs), have implemented changes on how to handle VAT.
Two new UK ecommerce reforms:
1. U.S. companies need to charge sales VAT to private consumers at point-of-sale on goods sold below £135. (This replaces paying import VAT on goods below £135 to the UK customs.)
2. Certain online marketplaces are now taking on VAT obligations for U.S. sellers.
What major changes can a U.S. company expect when selling products to the UK? Let’s delve a little bit deeper, here are a few questions for U.S. sellers when selling online to private consumers in the UK:
1. Is your sale above or below £135 GBP (around $180 USD in today’s rate)?
If your sale is below £135 GBP:
As of January 1, 2021 all imports are subject to 20% UK VAT. There is no longer a VAT exemption for “Low Value Consignment Stock” relief, so your U.S. company needs to start charging VAT to your UK private consumers. Yes that is right, for any product priced £1-£135 GBP you need to add 20% UK VAT. This means a non-UK resident seller must add 20% VAT at the point of sale on their website checkout. For example, if you are selling something for $10 you need to add $2 VAT and thereby the total charge is $12 at checkout. The $2 collected in VAT needs to be reported and paid into HMRC. Charging VAT in the UK – legally requires a UK VAT registration. Your team at EuroVAT is happy to assist with VAT registration, reporting and filing materials.
If your sale is above £135 GBP:
Goods above this value are subject to import VAT and duty at customs. No new change to this rule, but the tricky part now becomes to keep track of currency exchange rates at each time of sale. For example, if your product price is $180 USD some days you might be above £135 GBP and other days below. The £135 threshold is based on the intrinsic value of the goods, excluding transport, insurance and other import taxes.
If your imported goods are valued above £135 (or multiple goods with a combined intrinsic value above £135) then you as a U.S. seller still have the option to make your private consumer pay for VAT to customs. In other words, when you sell the product you inform that they are responsible for importing the goods and have to pay duty + 20% VAT to customs.
Another option, would be for your U.S. company to register for a UK VAT number and pay duty and 20% import VAT. You still need to collect VAT from your private consumers and report taxes quarterly to the UK. Either way, it is advisable for companies with sales to private individuals in the UK to look into UK VAT registration. Please contact EuroVAT at vat@eurovat.com to explore your VAT options.
2. Are you selling from an online marketplace located in the UK?
If your online marketplace is handling fulfillment (ex. Amazon) and your product is sold within the UK by overseas sellers, this type of marketplace becomes responsible for charging and reporting VAT. A marketplace facilitated sale can mean that the sales platform authorizes the payment to the private consumer, or sets the general terms and conditions of the sale, or participates in ordering or delivering the goods.
For any “marketplace facilitated” sale of any value made by a U.S. company where the goods where already located in the UK, the marketplace also becomes responsible for the VAT. This means that the marketplace will collect the VAT from the individuals, and pay it to the UK tax authorities. Note that your U.S. company still needs to be the importer of the product to the UK, and you still need to be registered for VAT in the UK, so you can claim back the import VAT paid to the UK customs.
However, if your marketplace is just a “storefront” (ex. Shopify) and they are not handling fulfillment or they do not receive payment directly from your private consumers or a few other exceptions – you are still responsible for VAT. This type of platform only lists or advertises the product, or redirects/transfers customers to other electronic interfaces where goods are offered for sale, without further intervention.
Additional questions to consider:
-Who will be the importer of record? You or your private consumers?
-Do you have a UK EORI number? Or only an EORI valid in the EU?
-Are you using an EU MOSS number? Do you need a UK MOSS?
-Are you using the UK in a triangulation? You can no longer include UK.
-Are you buying or selling services? No change but slight modifications for B2C.
-Selling in Northern Ireland? Reforms are only partially applicable to Northern Ireland.
Please contact EuroVAT and ask about your case to find out what specific rules apply - we are happy to provide our comments. Please email vat@eurovat.com with your questions regarding VAT in the UK and the EU-UK Brexit Withdrawal Agreement.
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