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  • Writer's pictureGreenline Accountants


This is a brief overview of the VAT issues facing UK businesses since it left the EU and how to manage compliance. It is not exhaustive and you should seek specific guidance as to how the rules apply to your business.

The main source material for this article comes from Croner-I Business inform Lite feature - VAT after Brexit 7/7/21

As the UK is now outside of the EU, how VAT is applied and collected is now potentially more complex.

The One Stop Shop

While some businesses have regrettably decided to remove themselves from dealing with the EU because of the perceived increase in compliance, many other UK businesses will both want and need to continue to trade with businesses in other EU nations.

From 1 July 2021, the VAT rules on cross-border business-to-consumer (B2C) e-commerce supplies are changing. The idea is to overcome the barriers to cross-border online sales and address challenges arising from the distance sales and importation of low-value consignments.

The VAT exemption at importation for small consignments of a value up to €22 has been removed. This means all goods imported into the EU will now be subject to VAT. However, a new scheme, the Import One Stop Shop (IOSS), has been created for distance sales of low-value goods imported from third non-EU countries to simplify the declaration and payment of VAT.

The previous distance sales regime for sales of goods to consumers by supplies based in other EC member states and the VAT Moss systems for supplies of digital services has been withdrawn, replaced by the One Stop Shop (OSS) (an extension of the Mini One Stop Shop (MOSS)) and now includes supplies of all B2C services and inter EC distance sales from EC businesses to consumers.

The existing thresholds for distance sales of goods within the EU has been abolished and replaced by a new EU-wide threshold of EUR 10,000. (Below this threshold, supplies of telecommunications, broadcasting and electronic (TBE) services and distance sales of goods within the EU may remain subject to VAT where those goods are located at the time of dispatch, or transport begins, or the supplies of TBE services are made in the Member State where the taxable person is established).

Online marketplaces that facilitate sales to EC consumers are now classed as both receiving the supply from the supplier and making the sale to the consumer. The low value import scheme which allowed goods to be imported VAT and duty free into the EU where the consignment value was E22 (or less depending on the member state the goods cleared into) has bee withdrawn. and now the non-EC supplier is able to register and account for VAT at point of sale of the goods to the EU consumer, via IOSS.

How your business is currently set up and how you reach your end customers must be carefully assessed. Many businesses use storefronts such as eBay, Etsy and Amazon, so its important to know where your business’s goods are held before shipping. It may be the case that VAT becomes payable to EC and none-EC sales.

Again, the IOSS has been created for distance sales of low-value goods imported from third non-EU countries to simplify the declaration and payment of VAT as the VAT exemption at importation for small consignments of a value up to €22 has been removed

Simplification measures for distance sales of imported goods in consignments not exceeding €150 are also being introduced from 1 July 2021 where the IOSS is not used. Online sellers, including online marketplaces, can register in one EU Member State and use this registration for the declaration and payment of VAT on all distance sales of goods and cross-border supplies of services to customers within the EU. Registration will be with the OSS.

The Union OSS can be used by the following:

1. A taxable person established in the EU (who is not a deemed supplier) can use the Union OSS for:

  • Supplies of B2C services taking place in a Member State in which he is not established.

  • Distance sales of goods within the EU.

2. A taxable person not established in the EU for:

  • Distance sales of goods within the EU.

3. An electronic interface (established in the EU or outside the EU) facilitating supplies of goods (deemed supplier) for:

  • Distance sales of goods within the EU.

  • Certain domestic supplies of goods.”

Potential issues If you are an electronic interface making supplies of goods both under and over the Euro threshold, you may be a deemed supplier for some supplies and not others.

This can also result in your customers having a different experience depending on how much they spend. Therefore, it will be very important to keep good records and ensure that systems are correctly set up to correctly deal with these challenges.

Also, if you are an electronic interface facilitating supplies of goods to customers in the EU and the underlying supplier for all your sales is not established in the EU, you will be the deemed supplier in all cases and will need to account for the VAT accordingly. Special provisions are being introduced whereby online marketplaces and platforms facilitating supplies of goods are deemed for VAT purposes to have received and supplied the goods themselves (‘deemed supplier’).

From 1 July 2021, electronic interfaces such as online marketplaces (eg ebay, Etsy etc) will have new roles for VAT purposes in the EU:

  • They may become deemed suppliers.

  • They will have certain record-keeping obligations.

The online marketplace will be a deemed supplier if it facilitates:

  • Distance sales of goods imported to the EU with a value not exceeding €150; and/or

  • Supplies of goods to customers in the EU, irrespective of their value, when the underlying supplier/seller is not established in the EU (this is in respect of EU domestic supplies and distance sales within the EU).

To declare and pay the VAT due in other Member States, online marketplaces and platforms will be able to register for the One Stop Shop. If you use an online marketplace to facilitate the above types of sales, the marketplace will declare and pay the VAT due.

The electronic interface facilitating the sale will not become a deemed supplier for the following transactions:

  • Goods in consignments whose value exceeds €150 imported into the EU, irrespective of where the actual supplier/seller is established.

  • Goods supplied to customers in the EU, irrespective of their value, in case the underlying supplier/seller is established in the EU.

Therefore, if a UK company sells goods from the UK to an EU consumer through an electronic marketplace and the value exceeds €150, the marketplace will not be a deemed supplier. The customer will be required to account for the import VAT due on importation into the EU. This can sometimes result in an unexpected extra payment due by the consumer. How VAT is managed across your business could be multifaceted depending on where your goods are warehoused and the location of your end customers, and whether your company uses a third-party storefront. As such it is imperative you take advice on how to handle the new VAT regime at your earliest opportunity if you believe the new rules effect you.

Source: Corner-I Business Inform


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