Online Shopping – Festive Fun for Retailers?
The Dickensian Christmas experience of popping into town for a last-minute shopping session and being surrounded by fairy lights, carol singers, happy smiling street urchins and (largely fake) snow now seems like a long, long time ago. Online shopping has changed everything, and we live in a society where shoppers expectation of next day delivery is the norm.
Online retailers have a busy period ahead of the holidays, and this year it is not just stock levels and fulfilment that have to be considered. This year we also have the added complication of Brexit and the end of the transitional period. If you can deliver to your customers before 31 December 2020, then great. But the issue that is emerging is that even now, delays in shipping are arising due to a shortage of capacity. This could mean that goods in transit do not arrive until after 31 December.
So, what does that mean from a VAT and customs duty perspective?
Selling to the EU – Current situation
If you sell goods from the UK through an online store to private individuals in an EU country, this sale is subject to VAT in the UK unless your sales into the particular EU country have exceeded the “distance sales” threshold. If that is the case, you register for and charge VAT in the EU country where your customer is. If you source product from the EU and sell to individuals in the UK, the goods can move freely into the UK and VAT will be charged in the country from which the goods were sent unless the distance sales threshold in the UK has been exceeded, in which case the seller would be registered for and charge UK VAT on the sale.
From 1 January 2021
But from 1 January 2021, the UK will be treated as a non-EU country. Goods sourced from the EU to be sold in the UK and vice versa will have to be declared for export from the country of origin and declared for import into the country of destination. If declarations are incomplete or incorrect, or if the person exporting or importing has not set itself up to act as an exporter or importer, this will result in delays. In addition to the exporter and importer compliance requirements, customs officials on either side of the channel will also be required to inspect shipments, and as there will be a significant increase in shipments requiring inspection from 1 January, further delays seem likely. And its not just a timing issue. With effect from 1 January, products with a value of more than £135 from the EU imported into the UK could also be subject to customs duty… an additional cost that will either land with you or your customer.
Importing goods for those not familiar with the process can be complex, and most traders will rely on logistic service providers and customs agents, but the number of agents is finite, and the amount of work they can handle is also finite. If you are going to import for the first time, instructing a customs agent to act on your behalf as soon as possible is a must.
For those businesses that sell to consumers in the UK where delivery is by a postal package and the value of the goods is less than £135, the seller will be required to register for and charge UK VAT on the sale. There is no threshold that will apply.
While you may have little control over when your customers order products, or the delays that could arise at the border, you can plan to control the controllables. Communicate with your customers, work out what the VAT and customs duty position will be after 1 January, and take action to put in place everything that needs to be in place to allow your products to reach you customers as quickly as is practically possible.
Find out more
However, if you have any questions in the meantime, or would like to discuss the topics covered in more detail, please contact your local MHA member firm.