There are changes when:
- The company fulfills orders to the EU from GB (Great Britain doesn’t include the territory of Northern Ireland) as of January 1, 2021. Customs forms have changed.
- Some of the courier companies have changed their parcel terms of service, including those between GB and Northern Ireland.
Let’s look at the rules for customs declarations for GB goods that are shipped to the EU. Although all goods shipped this way require declarations, it’s a relatively easy process if the merchandise value is less than 1,000 EUR. The declaration forms, CN22 or CN33, are available at the post office or can be downloaded from the Post Office website. Typically, the third-party software for the sales flow or dispatch management will generate postal labels automatically, so there’s nothing to worry about except ensuring that the software is regularly updated for any current developments.
For larger export consignments, companies need to have an EORI, or Economic Operators Registration and Identification number, which can be applied for and obtained here. For importing goods from the EU and other countries, besides EORI, the company needs to have a Commodity Code and an accurate valuation of the imported goods. There might also be tariffs payable on imports for countries outside the EU.
An important aspect of the Brexit business are the new rules of origin, which determine whether the merchandise qualifies for the tariff-free arrangement. Companies should not worry about the rules of origin if the items they sell and ship to buyers in the EU have been manufactured wholly in the UK, or if they are made from imported components that have been sufficiently processed within the UK. The tariffs might be incurred in case the company imports goods for sale from countries outside the EU or sells those goods without changing them significantly. It’s important to understand those nuances because, in case the company fails to pay the tariffs on its end, the shoppers might be subject to a duty payment upon delivery, which might result in returns with DDU (delivery duty unpaid) and, above all, customer dissatisfaction. Thankfully, there’s still some permitted leeway as the businesses adjust to the new rules; however, it’s best to avoid the unpleasantries and adhere to the new regulations as soon as possible.
While the dust was settling in the first weeks of 2021, some courier services suspended their shipments to the EU, causing some significant disruptions in the supply chains. Although the majority of shipment and fulfillment companies are now operating more or less without any suspensions and have returned to “business as usual,” it’s worth reviewing the courier services for any changes on a regular basis to avoid unpleasant surprises.
The most significant developments, however, apply to the VAT rules, which require a more detailed foray into the changes.
Since the UK is now out of the European Economic Area (EEA), cross-border sales are no longer VAT exempt. New levies have come into force since January 2021, with more duties being imposed as of July 2021.
Here’s the rundown of changes:
- The UK left the EU Customs Union and VAT regime, meaning that the UK or foreign sellers now incur import VAT on imports into the UK or from the UK to the EU (up to 20%)
- The tax exemption for small consignments of 22 EUR (15 GBP) or less is abolished. Sellers now have to charge VAT at the checkout on imported sales equal to or less than £135. Sales above this number are subject to the UK import VAT as previously mentioned.
- HMRC requires marketplaces to become the deemed supplier for some imported sales not exceeding £135, meaning that it’s the marketplace’s responsibility to account for VAT and bill customers on checkout. Moreover, marketplaces are VAT liable for facilitated sales of any value by their non-UK sellers.
Since later in the article we’ll be talking about the viability of the B2B marketplace in the new post-Brexit reality, it’s worth paying particular attention to the VAT regulations with regard to marketplaces.
While, previously, responsibility for VAT accounting on sales through an online marketplace fell on the seller, now it’s the marketplace that ensures compliance with the VAT regulation. The rules potentially apply to any business that facilitates the sale and delivery of goods between third parties. The new treatment applies to scenarios where an overseas business sells to UK customers via an online marketplace using stock that’s already in the UK, with no monetary limits existing on such sales, and to situations where a business sells goods worth 135 GBP or less via a marketplace with goods being moved into the UK. In both scenarios, the VAT burden falls on the online marketplace rather than the seller or customer.
The following are other developments that require special attention:
- VAT-registered overseas sellers need to change the way they account for VAT, which is likely to be covered by a zero rate when the goods are in the UK at the point of sale.
- Sellers holding goods in the UK shall register for VAT (if they have not already) to enable the recovery of VAT on imports over 135 GBP.
- If goods sold are not exceeding 135 GBP, then overseas businesses do not need to register for the UK VAT, since the VAT responsibility has shifted to marketplaces.
- Online stores in the EU must now file a tax return and obtain an EORI number before they ship goods to the UK.
To ensure compliance with the above regulations, businesses should check if the new rules have been applied by either party in an online marketplace and if anything should be done to ensure they have.
On top of it all, starting October 2021, Visa and Mastercard will increase cross-border charges that will affect both the UK and EU merchants. (Mastercard, however, announced that the new rates will only apply to UK online purchases from the EEA.) More than likely, these costs will be passed on to the customer.