Since 1 January 2021, we have been dealing with many client enquiries involving the post-Brexit VAT arrangements, both for UK businesses importing goods from the EU, and EU businesses selling goods to UK customers.
From 1 January, goods imported from the EU into Great Britain are subject to import VAT and customs declarations. As far as VAT is concerned, there is no longer any difference for goods imported from an EU or non-EU country. UK businesses will not be disadvantaged by competition from VAT-free imports.
Accounting for import VAT
Good news! For UK VAT-registered businesses, the Government have introduced a postponed accounting system. For all imports, (both from the EU and non-EU), VAT does not need to be paid on arrival of the goods. Instead, this is accounted for on the next VAT return, at the same time as the input VAT is claimed.
Postponed accounting will improve the cash flow position of businesses that import goods from non-EU countries. Previously, businesses would have to pay import VAT on arrival and potentially wait to claim input VAT on a VAT return, up to three months later.
If the business is either not registered for VAT or chooses to deregister any goods imported from the EU will now be subject to import VAT at the time of arrival and will not be able to be reclaimed. This will result in an additional cost for the business which it may or may not be able to pass on to its customers.
Low value goods – business to consumer
From 1 January goods imported from outside the UK in consignments not exceeding £135 in value (equivalent to 150 Euros) will be subject to supply VAT rather than import VAT as described above.
These new arrangements also involve the abolition of the Low Value Consignment Relief which relieved import VAT on consignments of goods valued at £15 or less.
Therefore for most consignments not exceeding £135 in value, instead of VAT being collected at importation or delivery to the customer, VAT will be accounted for at the point of sale.
Non-UK businesses that sell low-value goods directly to UK customers, where the goods are outside the UK at the point of sale, will now need to register for VAT in the UK. The non-UK business will be responsible for charging and accounting for the VAT to HM Revenue & Customs.
Where businesses sell goods not directly to customers, but through an online marketplace (OMP), the OMP involved in facilitating the sale will be responsible for collecting and accounting for the VAT.
Low value goods – business to business
Business to business sales (not exceeding the £135 consignment value) are also subject to these new rules.
UK VAT-registered businesses who provide their VAT number, either to the direct seller or the OMP, will take over the responsibility to account for VAT through a reverse charge procedure on their VAT return.
The direct seller or OMP would then no longer be liable to account for the VAT.
For non-VAT registered businesses or those unable to supply a VAT number to the seller when the goods are purchased, the seller must then treat the sale as a sale to a consumer as described above.
Who should register for VAT in the UK?
You must register for VAT if you sell goods directly to UK consumers and the goods are outside the UK at the point of sale.
The distance selling threshold for sales from EU member states no longer applies.
For businesses established outside the UK, there is no VAT threshold. You must register for VAT on any value of sales if you are liable for VAT under these new measures.
What to do next?
There are many cross-border VAT changes now that the Brexit transition period has ended. With these new measures, we advise that you speak to a VAT expert to ensure your business remains compliant with the changes.