Top five ways Brexit has changed VAT

by TaxJar February 8, 2024

This guest post is from our friends at SimplyVAT. Please note: This blog was originally published in 2020. It’s since been updated for accuracy and comprehensiveness.

As a new year dawns, new opportunities for growth are presented with it. As your business expands you may be considering expanding your operations and exploring your overseas options. When considering entering a new market there are always several factors to weigh up. To assess the potential viability for your business, you will need to consider variables such as cost of goods in another country, supply chains, tax and regulatory issues, as well as established competition.

For many of you who are established in the US, the European Union (and now separately, the UK) are the first ports-of-call when planning your company’s future roadmap. There have, however, been a lot of changes recently due to Brexit (the UK leaving the European Union’s Single Market and Customs Union) and many of you may now be wondering what trade with the EU or the UK would look like for you.

The UK is an exciting market for many and presents itself with very impressive opportunities for online sellers. First of all, it is the world’s fifth largest economy and boasts the greatest number of online shoppers in Europe with 41 million customers choosing to buy online.

As of January 1, 2020 the UK’s transition period with the European Union has come to an end. A new Free Trade Agreement (FTA) has been agreed by the UK and the EU, establishing a new working relationship together. We have put together the top 5 legislative changes you should be aware of as you expand into the UK and/or EU:

What are the differences between selling through your own website or an online marketplace?

Previously you were accountable for your own VAT when selling through an online marketplace (OMP), now the OMP will be responsible for collecting the VAT on each sale on your behalf. If you are selling outside of an OMP and instead opt to sell through your own website, you will be liable for your own VAT obligations.

If you are sending consignments of under £135 to customers within the UK, you will need to register for UK VAT from the start. If the consignments are over £135, you can decide who the importer of record is. If you decide the customer will be the importer of record, then they will be liable to pay the VAT and not yourself. Should you choose this route, it is a good idea to make sure the customer is fully informed that they will need to pay the import VAT on top of their purchase price. If you decide you are the importer of record, you will need to obtain a UK VAT registration. We can help with this, contact us today at SimplyVAT.com.

Amazon’s pan-EU FBA program doesn’t include the UK

The pan-EU fulfilment by Amazon (FBA) program used to allow goods to freely be stored at any of its fulfillment centers of your choosing across the EU. The UK will no longer be part of this scheme and as such you will need to plan accordingly. You can still access fulfilment schemes on both sides of the border, but you will need to hold stock in each warehouse in both the UK & EU. From the 01 January – if you want to move stock into the EU, it is considered an import and you will have to obtain a VAT number in the country where your stock will be held. If you want further information, please get in touch.

Distance selling thresholds between the UK & EU

Distance selling thresholds no longer exist between the UK and the EU.

Any goods entering or leaving the UK from the EU will now be deemed an export and a zero rate of VAT will be applied, although you will be liable for import VAT on any goods moving from the UK into the EU where you are listed as the importer of record. To assist you in paying your import VAT, you may be able to take advantage of the Postponed VAT Accounting scheme introduced on the 01 January by HMRC (UK Tax Authority). This will allow you to account for your import VAT on your UK VAT return instead of paying it at the time of import which will relieve pressure on your cashflow.

Check whether you need a fiscal representative

A Fiscal Representative is locally established and is jointly and severally liable for your VAT obligations, therefore, there is an additional cost for this service. Whilst you don’t need a Fiscal Representative to access the UK market, in some EU countries the Fiscal Representative is compulsory. It’s important to factor in this cost to your cashflow. A list of EU countries that require Fiscal Representation can be found here.

EORI numbers & VAT registrations – do I need them?

An EORI (Economic Operator Registration Identification) number is required when importing into either the UK or the EU. You will need a separate EORI number for each the UK and the EU. You should apply for an EU EORI number in the country you wish to import into initially. This is an important consideration when planning your supply chain. In addition to an EORI number, you will also need to register for VAT when importing your goods for onward sale and both HMRC and the EU Tax Authorities may ask you to prove that you are planning on moving stock before you can be VAT registered.

It is important to bear all of this in mind when planning your expansion into the UK and also the EU markets, so as not to be caught out by the authorities for non-compliance. There are many useful resources available to help you as you plan your venture across the pond. Eurostat, the EU’s statistical office has neatly compiled a comparison of the costs of goods within the EU & UK which could help you weigh up the feasibility of your entry into the market. If you are planning to move goods between the UK and Northern Ireland, you must register for the Trader Support Service which will recommend all relevant actions you will need to take.

The UK is a thriving marketplace with an abundance of opportunities for you to explore. If you are considering expanding into the UK or EU and believe this may trigger additional VAT reporting requirements for your business, please get in touch with the SimplyVAT team today.