Cross-Border ecommerce changes to UK and VAT with Brexit
It has been over 4 years since the vote for the UK to leave the EU and the time has finally arrived where changes will occur and new rules for cross-border sales into the UK. These changes are not only for EU based merchants , but all merchants , including US based , who sell to customers in the UK.
The UK’s HMRC (Her Majesty’s Revenue and Customs) has overhauled the rules for VAT for ecommerce merchants as well as OMP’s (online market places) and there are significant changes that our merchants who ship to the UK need to be aware of.
The team at FlavorCloud has you covered and want to share an overview of the changes and how it will affect merchants shipping into the UK starting January 1st, 2021.
The UK is removing Low Value Consignment Relief (LVCR). Value-Add Tax (VAT) will be charged on all goods entering the UK as parcels sent by overseas businesses.
- This means that goods worth less than 15 GBP, previously tax exempt, will now be subject to the 20% VAT rate.
- New UK regulations means that for most imports of goods from outside the UK in consignments not exceeding 135 GBP in value the point at which VAT is collected will move from the point of importation to the point of sale. This will mean that UK supply VAT, rather than import VAT, will be due on these consignments.
- FlavorCloud, where we are involved in facilitating the sale, will be responsible for collecting and accounting for the VAT at the point of sale.
- For goods sent from overseas and sold directly to UK consumers without FlavorCloud involvement, the overseas seller will be required to register and account for the VAT to HMRC.
- B2B wholesale sales not exceeding 135 GBP in value will also be subject to the new rules. However, where the business customer is VAT registered in the UK and provides its valid VAT registration number to the seller, the VAT will be accounted for by the customer by means of a reverse charge.
- Overseas sellers will remain responsible for accounting for the VAT on goods already in the UK and sold directly to UK consumers without FlavorCloud involvement.
- Advise buyers/customers with advanced notification and move to DDP so you could help avoid surprises, and possibility of refused orders/shipments.
- Re-visit refund and returns policies for any needed updates.
Points for Non-EU Sellers to consider:
Next Steps for sellers to consider terms and identify the VAT/duty impacts to costs/item price-points and the cost impacts to your company and customers (buyers).
- Absorption of the additional VAT/duty to keep current price points the same
- Consider if registration with the UK for VAT charges/payments is required – especially if you sell through non-FlavorCloud channels. For additional information, see https://www.gov.uk/vat-registration/how-to-register and https://www.gov.uk/guidance/register-for-vat.
- Sellers do not need to establish an Importer of Record (IOR) status with the UK for sales facilitated via FlavorCloud; we will act on your behalf.
Our goal at FlavorCloud is to simplify the new UK VAT regime for ecommerce merchants who ship cross-border and keep your sales flowing to the UK with minimal effort for the seller. Shipping DDP (Delivery Duties Paid) with FlavorCloud will minimize any changes required for merchants and is the optimal solution for customers to pay duties and taxes at the point of sale. If you are currently shipping DDU (Delivery Duties Unpaid) now is the time to switch to DDP, let us show you how.