On 1 January 2021, a number of other measures were also introduced that are specific to online traders. Similar measures will apply throughout the EU from 1 July 2021 as part of the E-commerce VAT Package (the EU delayed implementation to this date).

The E-commerce VAT Package is being introduced throughout the EU to combat e-commerce VAT evasion. The EU Commission estimates that e-commerce VAT evasion costs the EU €5 billion a year – this is expected to grow to €7 billion in 2021. The measures are intended to tackle this fraud by making Online Market Places (OMPs) responsible for accounting for local VAT.

Distance selling rules no longer apply

From 1 January 2021, distance selling regulations no longer apply in the UK. EU distance selling thresholds no longer apply for distance sales made to UK customers.

This means non-UK sellers will need to register for UK VAT and charge UK VAT on distance sales made, irrespective of the value of the sales. There is no registration threshold – registration applies immediately.

Where an OMP facilitates sales to UK customers, the OMP may charge the VAT (see below) instead of the online trader.

Action

  • Distance sellers must register for UK VAT with effect from 1 January 2021

Imports into the UK from 1 January 2021

Low Value Consignment Relief (LVCR) will not apply from 1 January 2021. LVCR allowed imports of less than £15 to take place VAT-free. The current EU limit of €22 is being withdrawn from 1 July 2021 as part of the E-commerce VAT Package.

From 1 January 2021, all imports into the UK are subject to VAT. However, whether import VAT arises and how VAT is accounted for on the sale to the customer depends on a number of factors:

  • Where the goods are located at the point of sale
  • If the consignment* value exceeds £135*
  • If an OMP has facilitated* the sale
  • If the sale is Business to Consumer (B2C) or Business to Business (B2B)

Goods located outside the UK at the point of sale from 1 January 2021

Consignment not more than £135

UK VAT will be charged at the point of sale, i.e. at the checkout. This is called ‘supply VAT’. There will be no import VAT.

If an OMP does not facilitate the sale:

  • the business must report and pay the supply VAT
  • the business must have a UK VAT registration
  • a copy of the tax invoice must accompany the goods in transit – this will allow checks to take place at the border

If an OMP facilitates the sale, the OMP will account for VAT at the point of sale.

If the overseas seller only sells goods via OMPs in consignments not exceeding £135:

  • it will not require a UK VAT registration
  • it will require a GB EORI number to enable completion of UK simplified customs declarations

Note: it is possible to obtain a GB EORI number without a UK VAT registration.

Consignment exceeds £135

Normal customs processes and VAT rules will apply. From 1 January 2021 goods imported into the UK require customs declarations (whether immediate or deferred) and may be subject to customs duty.

VAT-registered business can use postponed VAT accounting to account for import VAT on their VAT return, rather than paying import VAT on clearance and waiting to reclaim this. Please refer to our general Brexit guidance for more details.

The sale to the customer is subject to normal UK VAT. The trader will need to have a UK VAT registration.

Action

  • Determine how you will establish the consignment value of goods located outside the UK at the point of sale
  • Establish if an OMP facilitates your sales
  • Implement the necessary steps, depending on the consignment value of goods

What if it is a B2B sale?

B2B sales not exceeding £135 are subject to the reverse charge by the UK customer where a valid VAT number is provided.

B2B sales exceeding £135 are subject to the normal customs and VAT rules. It will be necessary to establish which party is importing the goods into the UK – this will be determined by the INCOTERMS. If the seller is importing the goods, import VAT and customs duty may arise and the onward sale to the business customer will be subject to UK VAT in the normal way.

If the business customer is importing the goods into the UK, it will need to manage the import VAT and customs duty position.

Goods located outside the UK at the point of sale from 1 January 2021

The goods will have been imported into the UK by the trader and normal customs processes and VAT rules will apply. Please refer to our general Brexit guidance for more information.

The seller must be registered for VAT in the UK. The sale to the customer is subject to UK VAT in the usual way, unless the OMP facilitates the sale.

If the OMP facilitates the sales, the OMP is deemed to make the sale to the UK customer. There is a ‘deemed’ supply of the goods from the overseas seller to the OMP. This is treated as zero-rated for VAT purposes. This means the overseas seller is still required / able to register for UK VAT to reclaim any purchase or import VAT it has incurred.

Action

  • Read our general Brexit guidance on VAT & customs duty changes from 1 January 2021
  • Review what steps you need to take to continue to import goods into the UK
  • Establish if an OMP facilitates your sales

What if it is a B2B sale?

B2B sales are subject to the normal rules. The seller charges UK VAT because the goods are located in the UK at the point of sale. The reverse charge does not apply.

BREXIT & Amazon traders - changes from 1 January 2021

Amazon released guidance for its Selling Partners. From 1 January 2021, Amazon changed the way it operates across the new UK-EU customs border.

The UK is not part of the Pan-EU FBA or EFN from 1 January 2021

The UK is a key market for many online traders

Amazon FBA Announcement

From 1 January 2021 the UK is excluded from the European Fulfilment Network (EFN) or Pan-EU Fulfilled by Amazon (FBA) programme.

Amazon has confirmed that:

  • FBA offers using EFN will not be fulfilled across the UK-EU border
  • Pan-EU FBA inventory transfers will stop between the UK and the EU
  • Pan-EU FBA will continue to transfer inventory within the EU
  • Sellers will be responsible for shipping goods to UK fulfilment centres for UK FBA operations
  • Seller-fulfilled orders (where the Selling Partner is using a 3rd party carrier), can continue to be fulfilled across the UK-EU border. The Selling Partner is responsible for ensuring that all duties and tariffs are paid prior to delivery to the customer.

Action for Amazon traders:

  1. Work with your logistics provider to ensure that all relevant customs declarations can be made when stock moves into and out of the UK
  2. Consider appointing a customs agent to manage the paperwork and process if needed
  3. Check whether your products are subject to customs duties upon arrival into the UK. The new UK Global Tariff contains the relevant information and it is estimated that 60% of tariff lines will be duty free
  4. Obtain a GB Economic Operator Registration Identifier (EORI) number to import goods into the UK. Most businesses already have one of these but we recommend you confirm this. It is a straightforward process to obtain a GB EORI number. We can do this for you
  5. You will need to know the origin of your goods to be able to benefit from any preferential duty rates under the UK-EU Trade Cooperation Agreement. This is a specialist area – we can help

How Türner & Co can help

  • VAT register distance sellers in the UK
  • Advise on INCOTERMS
  • Apply for a GB EORI number
  • Advise on duty rates and rules of origin
  • Work with OMPs / customs agents / freight forwarders to manage your position in the UK

To set up a call to discuss the next steps or further information, please contact Kate McDermott: kate.mcdermott@tuerner.com

Terminology

Term Explanation
OMP Online Market Place: any electronic interface (website or mobile application) such as a marketplace, platform, portal or similar that facilitates the sale of goods to customers
Consignment The £135 applies to the value of the consignment as a whole, not individual items within the consignment. Therefore, it is necessary to know whether goods are packaged and sent individually to a customer or part of a consignment with other goods
£135 The £135 value aligns with the threshold for customs duty relief. Simplified customs declarations will be permitted for goods that do not exceed £135 in value. The value of the goods for VAT purposes will be based on the price at which they are sold to the consumer, not the customs valuation declared at import
Facilitates An OMP facilitates a sale if it participates in any of the following, either directly or indirectly:

  • It sets the terms and conditions under which the supply of goods is made
  • It is involved in authorising the charge to the customer in respect of the payment made
  • It is involved in the ordering or delivery of the goods

Disclaimer: The contents of this document are for general information only and are not a substitute for formal professional advice. Türner & Co accepts no liability for any actions taken or not taken on the basis of this document without taking formal advice from us. Information correct at 3 February 2021.

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