Customs and VAT changes from 1 January 2021

Latest Update: 27 April 2021

List of FAQs from HMRC to cover postponed VAT accounting

Update:11 February 2021

Addition information on digital services and what is covered and what is outside the definition

Update: 2 February 2021

Additional information on selling into the EU and not registering for EU VAT

Update: 27 January 2021

Additional section added for buying and selling via an online market place plus new FAQs

Introduction

The UK has left the EU, and the transition period after Brexit came to an end on 31 December 2020. All businesses trading abroad should, by now, have taken action ready for new rules that came into force on January 2021. A bulletin issued by the Department for Business, Energy and Industrial Strategy (BEIS) provides the latest information for businesses.  All information on the UK Transition can be found on the GOV.uk website here.

In the details that follow, special note should be made of references to the United Kingdom (UK) which includes England, Wales, Scotland and Northern Ireland; Great Britain (GB) which refers to England, Wales and Scotland; and  Northern Ireland which is dealt with separately for many of the new introductions. It should be noted that there will be no changes to transactions between businesses in GB and those in Northern Ireland save for some customs checks that may be required.

Information on the following topic areas below can be found by clicking on the appropriate link:

EORI number 

From 1 January 2021, any business moving goods to or from Great Britain and the EU will need to have an Economic Operators Registration and Identification number – an EORI number. It is likely that they will already have this but if not, an application should be made immediately otherwise they will be prevented for moving any goods across the border.  Importers will need an EORI number that starts with the letters GB and it may be that an EU EORI number will also be required for goods moving from GB to the EU if they are being moved into the business' own warehouse. They will not usually need an EORI number of they only provide services or move foods between Northern Ireland and Ireland but there will be checks to ensure those goods are not then moved into the EU.

From 1 January 2021 businesses will need an EORI number that starts with XI to:

  • move goods between Northern Ireland and non-EU countries
  • make a declaration in Northern Ireland
  • get a customs decision in Northern Ireland

To get an EORI number that starts with XI, they must already have an EORI number that starts with GB. If they do not have one, they should apply for an EORI number that starts with GB as soon as possible.

If the business already has an EORI number that starts with GB and HMRC thinks they need one that starts with XI, they’ll automatically send one in mid-December 2020.

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Grants for training

Grants are available for businesses to spend on training to update their knowledge in this area to enable them to prepare for the move to the new systems. Further information can be found here.

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Border controls 

The transition period for the UK to finalise its exit from the EU ends on 31 December 2020, and the UK will take control over its borders and new regulations will come into force.

This is being implemented in three stages:

  1. January 2021 – traders importing standard goods will need to prepare for basic customs requirements such as the keeping of sufficient records of imported goods. Traders will also need to consider how they account for the VAT on such goods (explained later). Traders will have up to six months to complete customs declarations. If tariffs (explained later) are due then these can be deferred until the customs declarations have been completed. There will be some live checks on the import of certain items such as high-risk live animals and plants but they will not have to enter the UK at a Border Control Post (BCP).
  2. April 2021 – All products of animal origin and all regulated plants and plant products (e.g. honey, milk or egg products) will require pre-notification and relevant health documentations. Any health checks will take place at the destination and not at a BCP.
  3. July 2021- from this date onwards, traders will have to make full customs declarations at the point of import and will have to pay tariffs at that time. Health checks will take place at a BCP and not at the destination.

Full details can be found here.

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Import tariffs

An import tariff is a charge placed on certain imported goods to ensure that domestic products and jobs are protected from cheaper imports. It is intended to reduce the imports by, effectively, raising the cost of those goods. Tariffs also act as a revenue generator for the Government. Tariffs operate independently of VAT but, unlike VAT, cannot be reclaimed. Currently, the UK enjoys tariff-free trade with other EU countries, although tariffs may be imposed on goods brought into the UK from outside the EU. 29 December 2020 As the UK Government have agreed on the terms of a trade deal with the EU (which has now been ratified by the UK and EU Governments), this tariff-free situation between the UK and countries in the EU will continue. Note: exporters to the EU will need to provide documentation on proving the rule of origin of the goods otherwise import tariffs may still be applied in the EU.  if the documentation is not complete, or requirements as to the rules of origin are not fulfilled then tariffs may be applied. It is possible that double tariffs may apply for goods imported into the UK and then exported to the EU.

From 1 January 2021, the UK will operate its own tariff measures, called the UK Global Tariff (UKGT) which replaces the current EU Common Tariff (which applies until 31 December 2020). The main difference between the two is that the UK version has been somewhat simplified.

From 1 January 2021, the UKGT will apply to all goods imported into the UK unless:

  1. An exemption applies which includes areas such as temporary suspensions and tariff quotas. A full list can be found here.
  2. The goods come from a developing country which is listed under the UK Generalised Scheme of Preferences. The UK is currently planning to continue providing trade preferences to those countries on the existing EU list. Note: not every type of import will be included for every country on the list - for example, there is an exclusion list for arms deals with some countries.
  3. The country of import has a trade agreement with the UK. The government is still discussing trade agreements with individual countries around the world. The full list of countries with whom the UK already has a signed agreement, or with whom the UK is still in negotiation, can be found here

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For all countries for which the UK does not have a signed traded agreement, the UK will adhere to the World Trade Organisation (WTO) rules.

Some goods are covered by a tariff quota which means that imports up to the quota level can be imported at a lower, or even a zero, level. The limit may be expressed in units of weight, volume, quantity or value. Once the limit has been reached, a higher tariff rate will apply. In order to check the tariff level, you will need to search via an 8 digit commodity code, or a product description or a combination of both. The full list of proposed tariffs can be found here. The list is huge (11,830 commodities) and just glancing at the descriptions is worth it to see the variety and extent of the different commodity areas.

For example, looking at one of the earlier commodities in the list is the import of live horses (excluding those who are purebred for breeding purposes for which the tariff is zero) - the commodity code is 0101-29-90, the existing EU tariff is 11.5% of the value and the UK Global Tariff will be 10% of the value. As in many of the commodities, the percentage has been simplified. Others have changed only because the amounts are changing from Euro to sterling through currency conversion.

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VAT changes on acquisitions/imports from January 2021

The way we deal with VAT and trade with the EU changes on 1 January with the scope of changes being different depending on whether businesses are trading from CB or Northern Ireland.

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The treatment until 31 December 2020

A private individual purchasing goods and services from another EU country will be charged VAT at the rate in operation in that country (subject to the Distance Selling Threshold).

If a VAT registered business buys in goods from a VAT registered supplier in another EU country then this is termed an Acquisition and the Business to Business (B2B) system operates. The purchaser and seller exchange VAT numbers and no actual VAT is charged on the invoice. However, the value of the nominal VAT is shown on the VAT return in boxes 2 and 4  of the purchaser’s VAT return. The value of the purchase appears in boxes 7 and 9 of the VAT return.

If a VAT registered business buys in a service from a VAT registered supplier in another EU country then this is dealt with as a reverse charge. The purchaser and seller exchange VAT numbers and no actual VAT is charged on the invoice. However, the value of the nominal VAT is shown on the VAT return in boxes 1 and 4  of the purchaser’s VAT return. The value of the purchase appears in boxes 6 and 7 of the VAT return. No amounts appear in the EU sections of the return (i.e. boxes 8 and 9)

If goods are purchased from a supplier based in a country outside the EU then this is termed an Import and VAT is paid at the point of import before the goods can be released. Note: currently imported goods for sale of less than £15 value are not subject to import VAT (called Low-Value Consignment Relief or LCVR). If the goods are then sold to a UK customer, normal UK VAT must be applied and noted in the VAT return as a normal UK sale. The value of personal gifts that can be imported free of VAT is £39.

Under normal rules, import VAT is paid directly to HMRC. For individual customers, this is often via The Royal Mail, Parcel Force or a courier company depending on who is delivering the goods. Such VAT is often not recoverable as the goods are for personal use. For VAT registered businesses who regularly import goods, they will often use a shipping company, which collects the VAT from the customer before the goods are released. The shipping company then reports and transfers that payment to HMRC. HMRC will then issue a C79 form to the purchasing business which can be used to reclaim the import VAT in the next VAT return. C79s are normally received just after the middle of the month following the payment, so depending on the month in which payments are made, it may be possible to claim the VAT back in the current VAT period, or it may mean waiting until the next period. Depending on the size of the amount this could very well cause a cash flow issue as the import VAT has actually to be physically paid and then reclaimed back via the relevant VAT return.

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The treatment from 1 January 2021

For businesses within GB (England, Wales and Scotland) all goods brought in from any other country (either within or outside the EU) will be treated as imports. For businesses within Northern Ireland, the treatment of all goods purchased from businesses within the EU will remain as it is now - i.e. EU Acquisitions. Goods purchased from outside the EU will be treated as imports in the same way as GB based businesses. The treatment of VAT on imports depends on the value of the consignment.

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Imports entering the UK valued at up to £135 per consignment

The LVCR will disappear and be replaced by a new system. If the value of the goods being imported is less than £135 then the VAT is declared at the point of sale and not the point of import. Customs declarations will still have to be made (although these will be made simpler including the use of reduced data sets and bulk recording) and the goods will be subject to normal customs processes and procedures. Note: the £135 limit on the value of goods covers the value of the entire shipment and not individual items in the shipment.

There are some exceptions to this rule (what a surprise) which are:

  • non-commercial consignments, such as gifts (gift relief for consignments valued up to £39 will remain)
  • consignments containing any goods that are subject to excise duty (such as alcohol and tobacco products, energy products and electricity)
  • consignments from Jersey and Guernsey that are covered by the Import VAT Accounting Scheme.

The purchaser will report the VAT to HMRC under VAT supply rules and not VAT import rules. The only reporting required will be the VAT on the sale which will be reported in box 1 of the VAT return.

However, if the customer is also VAT registered then these goods can be sold via the reverse charge scheme provided that VAT numbers are exchanged (so that the amount of nominal VAT will appear in boxes 1 and 4 of the purchaser’s VAT return and not in the seller’s return). If the VAT numbers are not provided then the sale is treated as a business to consumer sale and VAT charged accordingly.

Warning note: reports are coming out (22 Jan) that individuals buying online where goods are being sent from an EU country are experiencing high additional costs. Some EU based businesses are still charging VAT at their local rate (as they would have under the old system) and delivery companies (including Royal Mail) are having to pass on the costs of both import VAT, and their own costs to cover producing the import documentation, the journey through customers and additional delivery. Some costs are fixed (anecdotal evidence shows that Royal mail is charging £8 per delivery and one freight company is charging by weight plus a fee for processing the import VAT).

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Imports entering the UK with consignment values over £135

For goods valued at over £135 (per consignment), from January 2021 it will be possible to declare (and pay) the import VAT on the next VAT return instead of paying up front and having to reclaim it later. This is called postponed accounting.

Postponed accounting can be used to account for import VAT if:

  • the goods are imported for use in a business
  • the business’s EORI number, which starts GB, is included on the customs declaration
  • the business’s VAT registration number is shown on the customs declaration, where needed.

There are occasions when goods do not immediately go into free circulation (i.e. ready for selling). This includes, for example, goods that are imported into a bonded warehouse until needed. In such circumstances, the VAT will be declared at the time the goods are released for sale.

An online monthly statement will be available to download and keep for client records. It will show the total import VAT postponed for the previous month which you should include in your VAT Return. Note: the download is available through the business' tax account and will not be available to tax agents.

Due to postponed VAT accounting, there will be changes to the way you complete the boxes on your VAT Return.

Box 1 - Include the VAT due in this period on imports accounted for through postponed VAT accounting.

Box 4 - Include the VAT reclaimed in this period on imports accounted for through postponed VAT accounting. (Note: this may be a ‘cancelling’ item as they are likely to be for the same amount.)

Box 7 - Include the total value of all imports of goods included on your online monthly statement, excluding any VAT. Any VAT on a subsequent sale will appear as normal.

This could remove the issue of cash flow as no actual import VAT will be paid – the amount is a paper transaction only. If customs declarations are postponed for any reason then an estimate should be made which will be adjusted when the final amounts are known.

To enable the entries to be correctly made in the accounts you should use the relevant reverse charge code for VAT which will put the relevant amounts in both boxes 1 and 4 of the return. You should check with your software provider which code to use as some are introducing new codes.

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Reclaiming VAT paid in the EU

Businesses can continue to use the existing EU VAT refund system for claiming back VAT on expenses incurred in another EU country before 1 January 2021 until 11 pm on 31 March 2021. The existing system cannot be used to reclaim VAT incurred after 1 January. Each EU state will have its own rules for refunding VAT and businesses will have to register in each relevant country. A full list of the rules can be found here

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VAT treatment on the sale of goods and services until 31 December 2020

The current rules concerning VAT when selling goods overseas are as follows:

Sales to non-VAT registered customers in the EU – provided that the value of sales to each country within the EU falls below the distance selling threshold for that country the seller charges UK VAT as normal and reports the sale on the UK VAT return. If the value of sales to a particular EU country rises above that country's Distance selling Threshold then the seller must to register for VAT in that country and charge VAT at the county’s rate of VAT, reporting and paying VAT to that country’s VAT authority.

Sales to VAT registered businesses in the EU – use the B2B EU sales facility – no VAT is charged on the invoice and no VAT appears on the UK VAT return but the value of sales or outputs is recorded in boxes 6 and 8 of the UK VAT return. An EC sales list must be completed.

Sale of services to EU customers are treated as a reverse charge. no VAT appears on the UK VAT return but the value of the sale will appear in box 6 of the VAT return.

Sales to customers outside the EU – these are sold and exported at a zero rate (provided that all relevant rules are followed). No VAT appears on the return but the value of sales appears in box 6 of the UK VAT return. Sellers should be aware that their customers may have to pay import taxes in their own country.

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Exporting goods - introduction

Exported goods can be sold at a zero rate for VAT in GB and NI provided that the seller satisfies a number of requirements. Note however that Import VAT will have to be paid in the relevant EU country.

There are conditions that must be fulfilled for the export to be zero-rated for VAT in the UK:

  • The goods must be exported from the UK within specific time limits of the sale taking place (normally 3 months or 90 days)
  • Official or commercial evidence must be obtained of export actually taking place
  • Supplementary evidence of the export must be obtained if required

Until 31 December 2020, goods are deemed to be exported if they are sold by any UK based business to customers outside the EU. 

From 1 January 2021, there will be a difference to the definition of an export depending on whether the business is based in GB or Northern Ireland. Goods are deemed to be exported from Great Britain if they are transported to any country outside the UK. If a business is exporting to an EU country then the exporter must check that the receiver has the necessary certificates to import those goods (if relevant). However, we are still awaiting final decisions on how to deal with moving goods through Northern Ireland. For sales to EU customers, further information will follow on the treatment of VAT as import VAT will need to be paid in any EU country.

For businesses in Northern Ireland goods will be deemed to be exported if they are transported to any country outside the EU. If the customers are based within the EU they are deemed an EC sale. From 1 January 2021, all goods leaving Great Britain (i.e. England, Scotland and Wales) will be subject to export rules. For VAT, as we understand it at the moment, businesses in Northern Ireland will still be subject to existing rules (i.e. EC sales to customers within the Eu and exports to customers outside the EU). The following rules apply to all exports.

Exporters will need to make customs declarations when exporting goods to all countries, including those in the EU and suppliers may also need to obtain relevant licences.

There are two types of exports (classified by the way they are transported) - direct and indirect exports. Direct exports are ones that are exported by the seller; indirect exports are ones where the export if organised by the buyer.

Direct export and goods can be transferred into one of the following ways:

  • In the seller's own baggage and/or in the seller's own transport- (updated 25 January) For goods moving either in or out of GB, there is a need to complete a simple declaration if the individual is carrying goods to sell or to use by a business with a value not exceeding £1,500 and not weighing more than 1000kg or classed as excise or restricted goods. If online registration is not made then the individual must pass through the red customs channel (if bringing goods into the country). Commercial goods exceeding £1,500 in value must be accompanied by a full standard customs declaration to declaration to HMRC
  • As per own baggage
  • By rail, post or courier service
  • By a shipping line, airline or freight forwarder employed by the seller and not the customer

An indirect export is one where the overseas customer or their agent collects, or arranges for the collection of, the goods from the supplier within the UK and takes them outside of the UK or EU.

The conditions that must be fulfilled if the export is an indirect export are that these goods must not be:

  • supplied to a private individual who is resident in the UK
  • supplied to a customer that has a place of business in the UK from which taxable supplies are made
  • delivered to, or collected by, a UK customer at a UK address

If all the conditions for the relevant type of export are fulfilled then goods can be zero-rated for VAT, regardless of whether the customers are VAT registered or non-VAT registered in the country of destination.

If the conditions cannot be fulfilled then the goods must be supplied subject to the appropriate UK rate of VAT. If the goods are sold under zero rate VAT for export but are later found not to have been exported, or the correct evidence provided, then VAT must be accounted for as if the goods had been sold within the UK. This involves an amendment to the VAT return to ensure that the selling price is re-allocated as VAT inclusive and, for a rate of 20%, the VAT element of the sale is calculated at a fraction of 1/6. The VAT must be accounted for in box 1 of the return for the period in which the relevant time limit expires. Ig the goods are subsequently exported then the VAT can be reclaimed in the period in which the evidence is produced.

For the purposes of the VAT return, no VAT will be shown in box 1 but the value of any exports must appear in box 6.

Further details and a full list of conditions and evidence requirements can be found here

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Carrying cash in and out of the country

Northern Ireland - Individuals will need to make a declaration if they are carrying 10,000 euros or the equivalent in any other currency of cash and travelling to or from a non-EU country. They also need to make a declaration if they are carrying 10,000 euros or more of cash and travelling from Great Britain to Northern Ireland. They can make the declaration at any time in the 72 hours before the time of travel. If you carry cash of 10,000 euros or more in or out of Northern Ireland, you do not need to declare if you are entering or leaving a country in the EU. You also do not need to make a declaration when you are taking cash from Northern Ireland to Great Britain.

Great Britain - Individuals need to make a declaration if they are carrying £10,000 or more into or out of Great Britain from any country, including the EU. They do not need to make a declaration if taking cash from Northern Ireland to Great Britain.

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VAT treatment on the sale of goods and services from 1 January 2021

Provided that the rules for export are followed and satisfied, any sale by a GB business to any country outside the UK has deemed an export. Any sale by a business based in Northern Ireland to any business outside the EU is also treated as an export. (Note: any sale by a business based in Northern Ireland to a business within an EU country will be treated exactly the same as any EU sale at present).

Exported goods (and services although these do not need to fulfil the export of goods conditions) are sold at zero rates as far as a GB VAT return is concerned. No VAT appears in the top half of the VAT return and the value of the sale appears in box 6 of the VAT return. However - the rules for selling to customers within the EU will involve the charging of EU VAT in the form of import VAT in the EU country of destination.

There are several options (updated 2 February 2021):

  • The seller simply exports the goods at zero rates and lets the customer deal with the import VAT and customs at the other end - this is fairly simple for the seller but will involve the customer in additional paperwork and cost and could lose them as a customer. However, in the short term, this might be a way around the complexity. Note: the customer should be able to reclaim any import VAT (if they are a VAT registered business) but there may also be customs declarations and tariffs  due to that cannot be paid. The invoice must contain the country of origin and this will determine any costs due.
  • The seller pays the import VAT (and charges it on to the customer) but that involves the seller in additional paperwork and cost and is not completed correctly (including all customs declarations) may delay delivery and cause issues at the foreign port of import
  • Register for VAT from day 1 in each country to which you sell, charge VAT to the customer and complete the EU VAT return - this means multiple registrations and returns which is very time-consuming and for now option 1 above might be better if sales are small.
  • Register in one country for EU VAT and sell under the normal EU selling rules. Once 1 July 2021 sees the introduction on the EU-wide One Stop Shop (OSS) this could simplify the whole process. This option is best if a large amount of goods are being transported to the EU and sold on from there.

Note: some countries in the EU insist on a local Fiscal Representative who will deal with all customs and VAT details but this can be very expensive

For GB based businesses, HMRC has confirmed that selling goods and services (such as bookkeeping) to private (non-VAT registered) customers in the EU will no longer have UK VAT added. EU VAT may have to be applied depending on the type of service provided.

Note: selling via an online market place will have specific rules which may differ from these. Further details to follow.

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Selling digital services abroad

Digital services comprise three  main areas: radio and television broadcasting services; telecommunications services; and electronically supplied services (e-services). ICB Members' clients are only likely to be involved in the provision of e-services which include:

  • supplies of images or text, such as photos, screensavers, e-books and other digitised documents, for example, PDF files
  • supplies of music, films and games, including games of chance and gambling games, and programmes on demand
  • online magazines
  • website supply or web hosting services
  • distance maintenance of programmes and equipment
  • supplies of software and software updates
  • advertising space on a website

However not all e-services are counted as digital services. For example, the first in the above list is an e-service but does not count as a ditigal service so is not includes in the rules. The following table is an extract from these:

Examples of electronic supplies and whether or not they’re ‘digital services’

Service

e-service

Electronically supplied

Covered by these rules

PDF document manually emailed by seller

Yes

No

No

PDF document automatically emailed by seller’s system

Yes

Yes

Yes

PDF document automatically downloaded from site

Yes

Yes

Yes

Stock photographs available for automatic download

Yes

Yes

Yes

Live webinar

No

No

No

Online course consisting of pre-recorded videos and downloadable PDFs

Yes

Yes

Yes

Online course consisting of pre-recorded videos and downloadable PDFs plus support from a live tutor

Yes

No

No

Individually commissioned content sent in digital form, for example, photographs, reports, medical results

Yes

No

No

Link to online content or download sent by manual email

Yes

Yes

Yes

Using the internet, or some electronic means of communication, just to communicate or facilitate trading does not always mean that a business is supplying e-services. Using the internet for the following does not count:

  • supplies of goods, where the order and processing is done electronically
  • supplies of physical books, newsletters, newspapers or journals
  • services of lawyers and financial consultants who advise clients through email
  • booking services or tickets to entertainment events, hotel accommodation or car hire
  • educational or professional courses, where the content is delivered by a teacher over the internet or an electronic network (in other words, using a remote link)
  • offline physical repair services of computer equipment
  • advertising services in newspapers, on posters and on television

If you need further information on a particular service then the following email address should be used: vat2015.contact@hmrc.gov.uk.

VAT Treatment - until 31 December, if a VAT registered business sold digital services to a VAT registered business in the EU they sold this under a reverse charge and reported the sales via the VAT Mini One Stop Shop (MOSS).

For sales made on or after 1 January 2021, businesses will not be able to use the UK’s VAT Mini One Stop Shop (VAT MOSS) service to declare sales and pay VAT due in EU member states.

The final return period for the UK’s VAT MOSS system was the period ending 31 December 2020. Businesses should only include sales made before 1 January 2021 in the final return, which should be submitted by the 20 January 2021.

Businesses will also be able to use the UK’s VAT MOSS system to:

  • amend returns until 11 pm on 20 January 2022
  • update registration details until 31 December 2024
  • view previous returns

Where sales are still covered by MOSS rules, for sales made from 1 January 2021, businesses will need to register for either:

  • VAT MOSS in any EU member state
  • VAT in each EU member state where you sell digital services to consumers

Full details can be found here

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Buying and selling via an online market place

Selling online, via an online market place is becoming more common and if the sale involves any goods being moved into or outside of the UK then the method of charging VAT on those sales changed on 1 January 2021. The changes coincide with but are in addition to the changing rules for the charging of VAT since the UK finally left the Eu and the Transition period came to an end on 31 December 2020.

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Definition of an online marketplace

HMRC’s definition of an online marketplace (OMP) is a business using a website or mobile phone app (such as a marketplace, platform or portal) to handle the sale of goods to customers which meets all of the following conditions:

  • in any way sets the terms and conditions on how goods are supplied to the customer
  • is involved in any way in authorising or facilitating customers’ payments
  • is involved in the ordering or delivery of the goods

A business will not be classed as an OMP if it only provides one of the following services:

  • processing of payments for the supply of the goods to the customer
  • listing or advertisement of goods
  • redirection or transferring of customers to other websites or mobile phone apps where goods are offered for sale, without any further involvement in any sale that might take place on that website or app

If a business sells goods that are based in the UK through the business’ own website or selling platform then standard rules apply for VAT as with any other type of sale, whether UK based (in which VAT is chargeable) or it qualifies as an export sale (at which point is becoming a zero-rated sale.

If selling through an OMP (such as eBay, Amazon), etc then the rules change depending on a number of variables, including the location of the goods at the point of sale. Note: Shopify is not an OMP - it is a platform for businesses to display their goods and sell direct. However, Etsy does count as an OMP as sellers can list their goods for sale on the Etsy website.

Goods based in the UK at the point of sale from an online website

If the goods are being sold by a UK seller, from their own website, the goods are based in the UK and the buyer is in the UK then the seller is responsible for the VAT.

If both the seller and their customer are UK based then the seller is again responsible for the VAT declaration to HMRC. The seller should ensure the correct VAT details are set up on the OMP and normally downloads reports monthly which will detail the amount of VAT that needs to be accounted for in that VAT return. If the UK seller is not VAT registered then no VAT needs to be charged to the customer.

The OMP will normally charge a fee plus VAT for the service which counts as a business cost.

Goods sold from the UK to customers abroad can be treated as exports at zero rate VAT provided that the export conditions are fulfilled but import VAT will have to be paid and the seller may have to register for VAT in the EU country concerned.

Selling by foreign businesses into the UK

Online marketplaces will be liable for the VAT on goods of any value that are located in the UK at the point of sale and sold by an overseas business through an online marketplace.  Until now the seller has had register for VAT in the UK in order to sell goods. However, as a number of companies have not done this in the past the rules changed on 1 January 2021. Now, instead of the seller having to register for VAT the OMP includes UK VAT in any selling price. This has led to reports of price increases of up to 20% on some sites since the start of the year as VAT is now being charged to UK customers.

Goods based outside GB at time of sale and sold within GB

If goods are outside of GB at the time of sale, are sold via an OMP and are subsequently imported into GB for delivery then similar rules apply to those goods that are imported and sold at a later date (as covered in the import/export articles and on the ICB Brexit hub on our website). An example of this would be when a private individual buys an item on the Amazon or eBay (or any other) websites and that item is in (say) China at the time of sale. The item is then shipped to GB for delivery to the customer.

The rules for working out the intrinsic value of the shipment is the same as for any imported consignments and does not include transport or insurance costs unless they are included in the price and not separately shown on the invoice, or any other relevant taxes. The calculation is carried out by the OMP. Any errors made at this stage must be accounted for by the OMP.

If the value of consignment is less than £135, provided correct import and customs documents are completed (which will be of a simpler format that the full customs forms) no VAT is charged at the time of import but VAT will be payable on sale and charged to the UK consumer. A VAT invoice must be provided although this could be a simplified invoice. The OMP will report the sale and pass the VAT on to HMRC in their next VAT return.

Note: if the goods are being sold from a Northern Ireland supplier to a Northern Ireland customer, the seller remains liable for VAT.

If the customer is a UK VAT registered business, they may provide the OMP with their VAT number for zero-rating. The UK customer then uses the reverse charge mechanism to report the VAT due.

These rules will not apply to consignments of goods from Jersey and Guernsey if VAT is collected and paid to HMRC under the Import VAT Accounting Scheme.

If the value of the goods is greater than £135, then the same import VAT rules as for any other import will apply but the OMP will be responsible for reporting the import VAT under the postponed VAT scheme and then charge VAT on the sale to the customer, reporting this on the next VAT return.

Goods based in the EU and sold in the EU

For countries within GB, if goods that are stored in an EU country are sold to customers in an EU country, different rules apply. Quite often businesses will use the OMP’s Eu based platform so VAT will be charged under normal EU selling rules and for B2C selling the distance selling rules will apply so one the seller has gone above the individual country levels they will need to register for VAT that particular country. However, the rules for online selling within the EU are set to change in July 2021 so new rules will apply from that date. Business in Northern Ireland who are selling into the EU the B2B and B2C rules for EU sales will apply (as they did prior to 1 January) as NI follows both sets of VAT rules.

Receiving personal data from abroad 

From 1 January 2021, if you or your clients currently receive personal information on (say) customers from abroad, including the EU, you should take measures to ensure that the data transfer falls within legal boundaries. Further information can be found here.

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Employing staff from abroad

Although not part of the VAT scheme, if any business employs staff from abroad (including EU and EEA nationals), from 1 January 2021,  they must act as a sponsor and fulfil all the necessary requirements. Full details can be found here.

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Working abroad - social security coordination

The UK has reached an agreement with the EU on its future relationship. The social security coordination provisions in this agreement ensure workers who move between the UK and the EU only have to pay into one country’s social security scheme at a time.

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Going to work temporarily in the EU under the detached worker rule

The country you and your employee will pay social security contributions in depends on whether the EU country has agreed to apply the detached worker rules.

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Where an EU country has agreed to apply these rules:

  • UK workers who are sent by their employer will only need to pay National Insurance contributions for the period of work in the EU country (up to 24 months). More information on going to work temporarily in the EU can be found on GOV‌‌‌.UK Information is also included ongoing to work temporarily in Norway, Iceland, Liechtenstein and Switzerland.
  • EU workers sent by their employer to work temporarily in the UK from a country which has agreed to apply the detached worker rule will remain liable to only pay social security contributions in the EU country. More information on coming to work in the UK can be found on GOV‌‌‌.UK Information is also included on coming to work temporarily in the UK from Norway, Iceland, Liechtenstein and Switzerland.

For EU countries that don’t apply these rules, you and your employee will be liable to pay contributions in the country where they are temporarily working if they are not in the scope of the Withdrawal Agreement.

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What you should do if you go to work in the EU

You should continue to apply to HMRC for the same forms on behalf of the individual going to work in the EU. If they do not qualify for a certificate, you or your employee will need to contact the relevant EU social security institution to start paying social security contributions in that country.

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Trademarks

International trademark registrations protected in the EU under the Madrid Protocol will no longer enjoy protection in the UK after 1 January 2021. On this day these rights will be immediately and automatically replaced by UK rights. If an individual owns such trademarks then nothing needs to be done at this stage but further information can be found here

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FAQs

Question Answer
UK Questions 
My business is not currently registered for VAT. Will I have to register for VAT if I start to trade abroad? No, the current threshold for VAT registration remains the same but you may have to register for VAT in a relevant EU country on your first sale
If my business sells goods that come from abroad do I need to register for VAT? Import VAT will need to be paid to HMRC. If the goods are < £135 in value then VAT must be paid via the sale. if over £135 then VAT is either paid on import or reclaimed via postponed accounting.
EU VAT queries 
Where can I find a list of the EU VAT rates?

 https://ec.europa.eu/taxation_customs/business/vat/telecommunications-broadcasting-electronic-services/vat-rates_en

Northern Ireland 
I have a client in Northern Ireland. What VAT do I charge? All transactions between GB and NI re subject to UK VAT as normal. The sale of goods might mean additional import/export customs paperwork but the VAT remains unchanged
A client is based in NI and sells to a customer in Ireland. What are the VAT implications? Any trade between NI and any country in Europe uses exactly the same VAT treatments as prior to 1 January 2021 i.e. B2C and B2B (where VAT numbers are exchanged and zero VAT is charged).
Is the Trader Support System for B2B and B2C selling? yes, anyone who trades with and through NI should look at registering for this as the issue is with the customs declarations and not VAT.
EORI Numbers 
Do I need an EORI number if I only sell services? No, the EORI number is for the export of goods only
How will I know if I need an EU EORI number? You should contact the shipping or freight company used - they should be able to advise you - it will depend on who is making the customs declarations. If the shipping company is using their own EU EORI number then you may not need to have one yourself
Reclaiming Import VAT - Postponed VAT Accounting (PVA)
Can an EU business reclaim their Import VAT? It depends on the country but yes they should be able to in the same way that the UK can
Can I use postponed  VAT for imports from (say) China as well as from the EU? Yes - postponed accounting is for all imports regardless of the point of origin. Reports will only be available for six months so they should be downloaded and saved as soon as possible. Reports can be downloaded from https://www.gov.uk/guidance/get-your-postponed-import-vat-statement
Can a VAT agent download the monthly postposed VAT report from HMRC? No - the report is accessed through the business tax account and is not available to tax agents directly
Do I have to use postponed accounting for VAT? No, a business can still pay the import VAT but it will then still need form C79 in order to reclaim the VAT back in the next VAT return. VAT is declared in box 4 of the return. The key to managing postponed VAT accounting is the online monthly statements. This new report will show simply the import VAT that has been postponed during the previous month.
Questions and answers from gov.uk on PVA
I’ve heard about PVA, but I’m not sure if it’s for me. Why should I use it, and where can I find out more about it?

PVA allows UK VAT registered importers to account for and recover import VAT on their VAT return. PVA is available permanently and we expect that most businesses will choose to use it, because it provides significant cash flow benefits compared to the alternative of paying the import VAT when the goods are imported.

Different rules apply in different situations. In some cases, you must account for import VAT on your VAT return – for example, if you delay your customs declaration. You can go to GOV‌‌‌‌.UK to check when you must use PVA to account for import VAT on your VAT return, and when it is optional.

How do I tell HMRC that I want to use PVA? There isn’t an application process for PVA, and you do not need to tell HMRC in advance if you want to start accounting for import VAT on your VAT return. You need to confirm in your customs declaration that you are using PVA.
How do I complete my VAT return if I’m using PVA? After you have selected PVA on your customs declaration you will need to account for import VAT when you complete your VAT return.
How do I get the statement I need to complete my VAT return?  
If you account for your import VAT on your VAT return, you’ll need to get a postponed import VAT statement online.Unless you have delayed your customs declaration, each statement will show the total import VAT postponed for the previous month.Your statements will usually be available to view by the 6th working day of the month.To view your statements, you’ll need a Government Gateway user ID and password which is linked to your EORI number. If you do not have a user ID and password, you can create your account on GOV‌‌‌‌.UK.
Selling goods to EU customers 
Is there a limit below which I do not have to charge EU VAT? It appears that if the value of the goods being sold is less than 22 Euros no EU VAT needs to be charged
Must I use a fiscal representative when selling to customers in the EU? It depends on the nature of the sale (goods or services) and also the regulations in each EU country. Have not been able to final an official list of each country's decision but there are several companies offering this service who are listing these on their websites. An internet search for 'Fiscal representative' brings up a long list of relevant companies offering this service. 
EC Sales and Intrastat returns 
Do we still need to complete EC sales and Intrastat returns? EC Sales lists are no longer required for businesses in GB. For NI the situation with B2B EU sales remains unchanged. Businesses importing (arrivals) goods into Great Britain from the EU are still be expected to prepare monthly Intrastat reports if over the £1.5m reporting threshold. This will only apply for 2021.
Sale/purchase of a service 
Do I need to charge VAT if I sell to a customer in the EU? If the customer is VAT registered in their own country then nothing has changed - the sale can be made zero-rated but you will still need to check their VAT registration is current. The customer will record the purchase of that service as a reverse charge. if the customer is not VAT registered or is a private individual then you may have to register for VAT in that country and charge VAT accordingly. Full details can be found here.
What happens if my client is selling digital downloads? VAT must be charged on all digital downloads for each EU country. There is no registration threshold. It is advisable to register for VAT in one country and use their VAT MOSS system to record sales and VAT charged in each EU country,
What happens if I buy a service from an EU supplier? If the service is B2B, and the invoice arrives with no VAT added, then you will have to declare the VAT under the reverse charge mechanism. Depending on circumstances you may be charged UK VAT but this can be reclaimed as 'normal' input VAT on the next VAT return.
VAT codes and the accounts 
Which VAT code should I use when entering EU transactions in the accounts? It depends on the software you are using - we know that some have already issued new codes to use but check with your software provider
 Tariffs 
What determines the Rules of origin? The rules of origin state that for products to be sold into the EU tariff-free, a percentage of the content must have originated from either within the UK or the EU. It is thought that this percentage is 55% but please check on this.
Online Market Places and own website selling
If I sell via my own website how do account for the VAT without registering for VAT in each country? Check with the deliver/shipping company you are using - it might be that you can arrange for import VAT to be charged via them or through them.
Do Shopify and Etsy count as an online market place? Shopify does not count as an OMP as it is purely a platform for hosting sellers. It does not sell directly and is never involved with the final customer. However, Etsy does operate as an OMP as sellers can list their products to sell from the Etsy website.
Will VAT be charged if a business sells books which are zero-rated in the UK? This will depend on the country into which the books are sold. If the country charges VAT on books ( and some do) then VAT should be added. if the country has a zero rate attached to books then probably not.
What happens with sales to Jersey and Guernsey? Both are outside the EU for VAT purposes so any goods are exported. As with all such sales check with the relevant tax authority to see the local rules for imports. However, as Guernsey does not operate a VAT system no VAT should be charged. Check for Jersey as they have a Goods and Services Tax which may apply
If I use my own website do I have to allow for different VAT rates? As VAT must be charged in the country of destination then yes, different VAT rates should be allowed for. You should also check about registering for VAT in each country into which you sell.
If I am using an OMP do I have to account for the VAT for EU customers? Speak to the relevant OMP as to how they are charging the VAT on your behalf and how it is going to be managed. Each OMP may treat this differently.

 

 

 

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