The new e-commerce VAT system introduced by the EU on 1 July impacts the treatment and compliance associated with supplies of goods to and within the EU, in particular those sold to EU consumers (B2C). It is intended to ease the administrative burden and aid the collection of VAT in the EU and the new rules affect both EU and UK suppliers.
As the festive selling period approaches and with attention here in the UK being focused on broader supply chain issues including driver shortages, have you considered the impact these VAT changes will have on your business, cash flow, stock management and broader supply chain?
• Are you meeting your compliance obligations within the EU? • Are you ‘over-doing’ your obligations, as these new rules simplify things? • Are you considering the effect your compliance is having on your customers and whether this is the best approach?
Effect on UK businesses
In terms of what these changes could mean for UK businesses:
• There is an important distinction between consignments up to €150 and those in excess of this value. There are administrative considerations for collecting VAT within this threshold and more challenging obstacles to overcome for clearing goods through customs where imports exceed €150.
• Goods which are sold from outside the EU to consumers in the EU will be subject to VAT in the member state of import. A VAT amount collected from a customer on import may come as a surprise to them – the use of Import One Stop Shop registration, where applicable, can help to avoid this issue.
• Goods which are sold from within the EU (including Northern Ireland) to consumers in other member states will be subject to VAT in the member state the goods are delivered to, where in respect of a business established in Northern Ireland, its sales are above the €10,000 threshold, and in respect of a business established in Great Britain, it has any distance sales it makes between EU member states.
One Stop Shop registration can be utilised to avoid multiple VAT registrations in the member states where VAT may be due on such sales.
Businesses should consider how the changes may affect them, including whether the new schemes can be used to avoid customers incurring any unexpected VAT costs. Where the new schemes are utilised, costings and website terms and conditions would need to be reviewed for EU VAT that would become due at the point of sale. The Gov.uk website includes several examples of these new rules in practice.
If you would like to find out if you are impacted by these new rules, then please contact us on 0330 124 1399 or visit www.krestonreeves.com.