Post-Brexit online sales INTO the UK - who is VAT registered?

[Andrew Rae]

As this other thread is largely focused on UK to EU online sales, I thought I'd start a thread about foreign businesses selling INTO the UK.

As of Jan 1st, any foreign business that sells online to a UK customer must register for UK VAT and collect VAT on that purchase at the point of sale, if the order is under £135. They have to file UK VAT returns and pay any VAT due.

Unlike the forthcoming EU Import scheme, registration is not optional and as far as I can tell, it's unclear what happens to a package if it arrives at the border without VAT having been paid.

Perhaps the package will be delivered and no unpaid VAT will be collected or noted.

Perhaps the package will be held by Royal Mail, and VAT and a fee will be collected from the customer (as will happen for packages over £135). Edit: All commercial packages under £135 are allowed through without import VAT being collected by Royal Mail.

Perhaps the package will be delivered without any VAT collection, but a tally will be kept by HMRC of all unpaid VAT from that business. HMRC can register a business for UK VAT without agreement and fines for unpaid VAT are by percentage of VAT owed, the percentage increasing over time. HMRC can also compel a foreign UK-VAT registered business to appoint a UK representative, who would be jointly liable for unpaid VAT (this last part does not apply to EU businesses).

Perhaps the package will be returned to sender.

Perhaps the package will be destroyed.

Perhaps a combination of all these outcomes will occur, evolving over time as the system beds in, and ramping up in severity as a business continually fails to register for, collect and pay UK VAT.

Of course, how effectively HMRC can chase up unpaid VAT from foreign businesses is unknown, but the UK-EU trade deal did include a tax mutual assistance agreement whereby HMRC can ask member state tax authorities to collect unpaid tax on their behalf, and vice versa. I'm not going to spend my time understanding how this is applied and at what threshold. Page 1062 if you want to look it up.

So which non-UK mini companies have registered for UK VAT?



https://www.gov.uk/government/publications/vat-notice-7001-should-i-be-registered-for-vat/vat-notice-7001-should-i-be-registered-for-vat#non-established-taxable-persons-netps-basic-information

https://www.gov.uk/guidance/vat-and-overseas-goods-sold-directly-to-customers-in-the-uk

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/948119/EU-UK_Trade_and_Cooperation_Agreement_24.12.2020.pdf

[Deedles]

Ordered €267 (£247) items from Deepcut in Vilnius - Lithuanian - EU on 3rd Jan . Deepcut confirm 0 VAT is applied on all their orders as per web site price . UPS charged £73 duty and £11.30 handling .

Interesting to see what happens over next few months /July re collection VAT up front

[Andrew66]

I wonder what the balance of trade is in the hobby are there a a lot of eu companies supplying the uk , would be interested to know how much eu miniature hobby companies are prepared to deal with uk , noticed the other day a article about a Dutch bike company who will no longer supply to Uk due to red tape , is this something eu miniatures companies will have to overcome , my expertise on this area is small , I run a small property maintenance company with 10 employees , nearly all our equipment and products were uk sourced now we sought alternates due to a 40% rise in costs , is this something we could see in hobby suppliers

[Andrew Rae]

Ordered €267 (£247) items from Deepcut in Vilnius - Lithuanian - EU on 3rd Jan . Deepcut confirm 0 VAT is applied on all their orders as per web site price . UPS charged £73 duty and £11.30 handling .

Interesting to see what happens over next few months /July re collection VAT up front

As your order was over £135, none of what I was referring to applied. Also, nothing is happening in July with regards to UK VAT. The new rules have applied from the 1st of Jan. 

[Andrew Rae]

It seems no import VAT is charged on any commercial packages under £135 entering the UK*. Is this good news for UK customers ordering from abroad**, but bad for foreign sellers who don't register for UK VAT, collect 20% VAT at the point of sale, and file their UK VAT returns? I can't imagine HMRC are just going to let all that VAT go unpaid, so unregistered sellers might be racking up fines along with their VAT bill.

* I guess just letting everything under £135 through means they don't need a complicated system to identify - at the border - which packages have VAT paid and which don't.

** Assuming VAT-unpaid packages from repeat offender sellers aren't returned or destroyed at the border. Still don't know what happens when sellers don't pay their VAT bill and fines and they're in a country that HMRC can't reach.

https://www.gov.uk/government/publications/notice-143-a-guide-for-international-post-users/notice-143-a-guide-for-international-post-users

[Silent Invader]

Re UK imports under £135, this from the BBC today might be  relevant

The UK government has delayed similar procedures for imports into the UK. But from 1 April the right paperwork will need to be filed, and from 1 July full checks and controls are due to begin.

https://www.bbc.co.uk/news/55831263

Edit: Further reading suggests the delays might only apply to inbound at-border customs checks on coding and certification etc, rather than VAT due, but it’s hard to find a reliable source of info.

[Andrew Rae]

Re UK imports under £135, this from the BBC today might be  relevant

https://www.bbc.co.uk/news/55831263

Edit: Further reading suggests the delays might only apply to inbound at-border customs checks on coding and certification etc, rather than VAT due, but it’s hard to find a reliable source of info.

Yeah I don't think that particular quote applies as it was in a section about food. However, I'm sure I did read somewhere about HMRC delaying full implementation of the rules (in regards to forced VAT registration and fines I think) but I can't find it again.

That Royal Mail are no longer collecting VAT on anything under £135 is a definite though - it's in the HMRC info I linked to. So it's nice to know I can order from any ROW mini company and know I won't have VAT and a handling fee charged by Royal Mail, if my order is under £135.

Less appealing is knowing that my order is potentially going towards a VAT bill and fines for that company, somewhere down the line. And there's always the potential my order would be returned or destroyed, though I would get my refund through Paypal I guess.

[zemjw]

I've been avoiding buying from outside the UK for a while now, but bought a couple of art prints at the weekend from Germany. The total came to just under £100.

The order details included a VAT total if I left the country as Germany. When I switched to UK the VAT component was zeroed, but the total price didn't decrease to compensate (in fact, it went up slightly as the p&p to the UK is more).

I've emailed the artist to check if that's the expected behaviour. Reading some of the stuff here suggests they may be keeping the money to pay a future VAT bill, but you'd think it would still be reported on the order form as VAT in that case.

[Andrew Rae]

I've been avoiding buying from outside the UK for a while now, but bought a couple of art prints at the weekend from Germany. The total came to just under £100.

The order details included a VAT total if I left the country as Germany. When I switched to UK the VAT component was zeroed, but the total price didn't decrease to compensate (in fact, it went up slightly as the p&p to the UK is more).

I've emailed the artist to check if that's the expected behaviour. Reading some of the stuff here suggests they may be keeping the money to pay a future VAT bill, but you'd think it would still be reported on the order form as VAT in that case.

It could just be that their net prices don't change depending on VAT. So the customer is charged the same if VAT is 19%, 21% or, if the customer is outside the EU, 0%. Shops can be set up that way if the seller wishes.

[zemjw]

Just had a reply from the artist and that is what they have done. They send off the vat amount for local/eu sales, and keep it and increase their profit for international sales (they actually said that specifically in the response).

However, given that the price does include local vat, it still means I'm going to get hit with double vat charges - actually slightly more than double due to the joys of compound maths