Changes For Online Sellers In The UK And Europe In 2021

Brexit: Changes For Online Sellers In The UK And Europe In 2021

Published: 11/12/2020
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The Brexit transition period is coming to an end. This means that the UK is about to leave the EU VAT regime, that new customs regulations will be introduced, and as a consequence, we're leaving several taxation agreements behind.

Marketplaces have a role to play in this change, yet in OnBuy's case, our differentiated business model lends us a unique perspective on new VAT rules for 2021. Because OnBuy doesn't sell or handle stock, and neither do we handle transactions when you sell to customers, our role is to ensure our sellers have all the information they need to fulfil their VAT obligations correctly. Our partnership with hellotax makes it even easier for our sellers to move forward with confidence, too. Nonetheless, VAT compliance for online sellers is about to become more complex, and the whole trade relation between the United Kingdom and the EU is about to change. In this article, we take a closer look at the new tax duties and what businesses should do to avoid penalties – there are definitely big changes expected in 2021.

Brace yourself, Brexit is coming

With the end of the transition period, alongside further agreements between the EU and the UK, it all means that from 1st January 2021, new kinds of trade rules come into force. This means not only new VAT regulations in the UK, but also that trans-border rules will almost change completely. One thing upfront to keep in mind is that the UK will lose its status as a member of the EU, and in terms of taxation it will be treated as a third-party country.

How is VAT connected to Brexit?

Value-Added Tax (VAT) is a consumption tax that is assessed on all goods and services sold in the EU. As the name 'consumption tax' suggests, this tax is paid by the final consumer. It is collected by sellers and forwarded to the local tax authorities via regular VAT returns.

For intra-community sales – that is to say, sales from one EU member state to another – there are certain VAT regulations that apply to make the handling of this tax easier and more efficient. All EU countries have their own VAT rates, those usually being a standard VAT rate, as well as one or several reduced rates. There are several regulations in place to make trans-border selling in Europe as easy as possible and ensure a customs-free trade zone.

Brexit means that the UK is leaving all these agreements and regulations behind, and new rules for selling to and from the UK will apply by the beginning of 2021.

NOTE: From 2021, when selling from the EU to the UK (and the other way around), you will need to take a look at British and European VAT regulations to stay tax compliant!

Will the VAT system remain after Brexit?

VAT system remain after Brexit

The UK definitely won’t abolish the whole VAT system. The high amount of governmental and economic revenue generated by the collection of VAT, and the close trade relations with member states of the European Union and beyond, will make big changes rather unlikely.

Still, not having to comply with the EU VAT Directive any more could mean some changes in certain areas, albeit rather small ones.

Which VAT-related changes have to be expected from 2021?

The EU rules for cross-border supplies, and movements between the UK and EU member states will no longer apply.

By the end of the transition period, supplies and movements of goods between the EU and the United Kingdom will be subject to the VAT rules on imports and exports. This implies that goods which are brought into the VAT territory of the EU from the United Kingdom, or are to be taken out of that territory for dispatch or transport to the United Kingdom, will be subject to customs.

The following changes should be kept in mind when selling online:

Import VAT

The current VAT regulations will be replaced and import VAT will no longer be payable on goods shipped into the UK. Postponed VAT accounting will apply to all goods imported, and it will be accounted for and paid in VAT returns.

Distance Selling Thresholds

Currently, one of the most important factors that leads to VAT duties in eCommerce is reaching the annual threshold limit for distance selling.

This means that under a certain net value of sales from one member state to another, no VAT registration in the country of import is required. Although a new general VAT threshold for the EU will be introduced by July 2021, this whole regulation is not applicable in the UK anymore.

Therefore, EU sellers selling to the UK will have to register for VAT in the UK right from the start. UK sellers shipping to the EU will have to register in the member state they are selling to, and goods will be subject to import VAT.

Intra-Community Supplies & Reverse Charges

There are plenty of changes to keep in mind here. Tax-exempt B2B intra-community supplies will no longer be in place, the reverse-charge mechanism will be abolished, and all movements are treated as imports/exports. This also means that when products are sold to the UK, the supplies are subject to UK VAT – and when sold from the UK to Europe, EU import VAT will be applicable.

Low-Value Consignment Stock

For imports of goods from outside the UK, in consignments not exceeding £135 in value (which aligns with the threshold for customs duty liability), the point at which VAT is collected will be moved from the point of importation to the point of sale. This means that VAT in the UK will apply, and not import VAT.

These new regulations involve the abolition of Low Value Consignment Relief, which relieved import VAT on consignments of goods valued at £15 or less. When goods are sent from overseas and sold directly to consumers in the UK without the involvement of an online marketplace, the overseas seller will be required to register and account for VAT in the UK. Due to how OnBuy operates, the same applies here, so sellers must make certain they take action to keep selling with confidence on our platform.

B2B sales below £135 will also be subject to the new rules. When a business is VAT-registered in the UK and provides its valid VAT registration number, or (VAT ID), to the seller, VAT will be accounted for by the customer.

EORI Number

From 1st January 2021, online sellers in the UK will need an EORI number. It has to start with GB if you want to move goods into or out of the UK. If you already have an EORI number that starts with GB, this number can still be used going forward.

When using a shipping company to move goods, the company will tell you if an EORI number is required. But when selling online and internationally, getting an EU EORI number is crucial, as the EORI number is used for making customs declarations and getting customs decisions in the EU.

Intrastat Reporting

The duty to submit Intrastat reports on a regular basis will also change by the end of the transition period. For imports from the EU into the UK, Intrastat reporting regulations will basically be the same. However, it will no longer be necessary to submit these reports for exports into the European Union.

Fiscal Representation

Due to not being part of the EU anymore, UK businesses with a VAT registration in an EU member state will need to appoint a fiscal representative. This is necessary in many EU countries, and the tax representative has to take care of a multitude of fiscal tasks in these countries. The primary aim is to ensure that there is a contact person on-site, and that all procedures can be handled and traced more easily.

VAT Refunds

The refund of VAT from member states to taxable persons in a third country (from 1st January 2021 in the UK) is subject to certain conditions. The requests have to be submitted to the Member State from which the refund is requested. Fiscal representation can and often is required to obtain the refund, and sometimes local regulations have to be considered as well.

Customs Regulations

With Brexit, the UK will also not be part of the European Customs Union anymore. This means that customs declarations for shipments between the United Kingdom and the EU have to be taken care of, and import VAT has to be paid when selling into the EU. Thanks to hellotax, you can find more about changes for fulfilment and international deliveries as you plan your business's growth with OnBuy.

VAT liability of online marketplaces

When goods are sold through an online marketplace, the online marketplace will be liable for VAT.

Online marketplaces will also be liable for the VAT on goods of any value that are located in the UK at the point of sale and sold by an overseas business through an online marketplace.

However, remember that OnBuy works a little differently to the other marketplaces you might also sell through. We don't hold our own stock, warehouse it in the UK or anywhere else, and we don't handle the funds made from your sales. As such, we're committed to making sure you, the sellers, have the resources you need to do this new style of VAT right.

Therefore, it's expected that online marketplaces will introduce further measures to ensure that sellers active on their platforms are registered for VAT properly. That's why we've partnered with hellotax and other leading financial experts, to help sellers meet the needs of the road ahead, wherever in the world they're selling to.

Staying VAT compliant in 2021

UK brexit

The transition period is about to end, and new VAT duties and trading regulations will come into force. To ensure the smooth handling of your VAT and all related tasks (no matter if selling to, from or within the UK), to make the best out of Brexit, and to continue selling online, get in touch with tax experts and automate your filings and duties.

hellotax is a VAT service provider for online sellers in Europe. With in-house tax accountants in all EU countries, as well as in the UK, plus an in-house developed VAT automation tool, hellotax offers an all-in-one solution for VAT compliance in eCommerce.

Register for VAT, file returns, take care of import VAT, monitor your threshold limits and goods movements, automate the correspondence with local tax authorities – and, most importantly, never worry about tax compliance again. Brexit brings a number of changes to the world of online business, but with the right partners, you're ready for anything on OnBuy and can continue selling successfully in 2021.

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